It’s feast or famine for the Canadian dollar. It’s on a seven-day losing streak at the moment, running to 1.3750 from 1.3480 in that time. Incredibly, the seven-day losing streak is only the worst since July, when it sold for nine straight days, though the magnitude of this move is larger.
If you look over the past few months, there have been a series of large one-way moves in both directions.
USDCAD daily
The market has been grappling with the relative underperformance of the Canadian economy relative to the US and inflation falling faster in Canada. Canadian CPI is at 2.0% y/y and the Bank of Canada is hinting at a faster pace of cuts.
Yesterday, RBC (Canada’s biggest bank) forecast that the BOC will cut by 5 0bps this month, which leans against pricing that shows only a 35% chance.
In the bigger picture, a big chunk of the latest USD/CAD rally comes on the USD side as the market recalibrates Fed pricing, now seeing a terminal bottom near 3.35% from 2.85% previously. That’s a point I made yesterday to Reuters. Still, the loonie has also been struggling against the euro and Australian dollar.
The next big hurdle for the loonie is Friday’s jobs report. I’ve seen a clear cooling in Canada, particularly in the housing market and that should spill over the consumer spending and eventually to jobs. I haven’t seen any sign of layoffs yet and tomorrow’s employment report is expected to show unemployment at 6.7% from 6.6% with 27K jobs added.