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Oliver Brown

Oliver Brown

15 Feb 2024

2 DK READ
29 Read.

Canadian Dollar Takes a Beating as US Inflation Remains Hot

The Canadian dollar got hammered yesterday after new numbers revealed US inflation is still running quite warm. Data from south of the border showed the cost of living in America picked up more than forecast last month, suggesting the Fed could stay aggressive on rates for longer than the markets were betting on. This sent the loonie tumbling over 1% against its US counterpart – its worst daily drop in close to a year.

Traders were clearly shaken by the latest inflation stats. With prices still rising at a decent clip in the world’s biggest economy, the expectation is the Fed won’t be easing up on rate hikes any time soon. And that’s bad news for Canada’s currency since it means our interest rates might not get a chance to fall nearly as quickly as folks were hoping. After all, when US rates are high, it puts upward pressure on Canadian borrowing costs too. Ouch indeed for the Canadian dollar!

So What Does This All Mean For The Canadian Dollar Going Forward?

Canadian Dollar

In the short-term, it’s probably going to be a bumpy ride for the loonie. As long as US inflation stays hot, the Fed will keep its foot on the brakes rate-wise. And as long as that’s the case, the Bank of Canada can’t be in a big rush to start lowering rates up here. The Canadian dollar may have further to fall against its American cousin before this is all said and done. However, once we start to see clearer signs of cooling price pressures in the States, the tide could turn back in Canada’s currency’s favor. For now though, it’s looking like more pain ahead for the poor old Canadian dollar.

So in summary, while the Canadian dollar got hammered yesterday, that’s probably not the end of its troubles. As inflation battles play out on both sides of the border, our currency remains at the mercy of moves by the Fed. Traders will be keeping a close eye on upcoming data to see if there’s any light at the end of the inflation tunnel. In the meantime, it’s shaping up to be a bumpy ride for the beaten-down Canadian dollar.

Canadian Dollar Takes a Beating as US Inflation Remains Hot
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