USD/CAD slumps to seven-month low against USD

The Canadian dollar (CAD) dipped to a seven-month low against its US counterpart (USD) on Thursday as investor confidence waned, driven by a blend of economic concerns and cautious remarks from the Bank of Canada (BoC). George Davis, Chief Technical Strategist at RBC Capital Markets, described the market movement as a “classic risk-off move,” highlighting how weakening oil prices, a major Canadian export, and a 0.1% decline in Canadian factory sales compounded the CAD’s woes.

Oil, a linchpin of Canada’s economy, settled 2.6% lower at $83.21 a barrel, intensifying the CAD’s decline. Simultaneously, the USD gained strength against a basket of currencies, buoyed by its safe-haven appeal and robust US economic growth, which marked its fastest pace in nearly two years during the third quarter.

The CAD traded 0.1% lower at 1.3815 to the USD, reaching its lowest point since March 10 at 1.3843. BoC Governor Tiff Macklem’s interview with the Canadian Broadcasting Corp further dampened the CAD’s prospects. Macklem suggested that the central bank might not need to tighten further if inflation aligns with their expectations, indicating a cautious approach to future rate hikes.

In contrast to the US, where Treasury yields failed to reach new highs, Canadian government bond yields decreased across the curve. The 10-year bond yield dropped 11.5 basis points to 4.007%, reflecting the prevailing uncertainty in the financial markets.