Canadian Dollar Hits Multi-Month Low Amid Bank of Canada Easing and US Dollar Strengthening

The Canadian dollar has weakened to multi-month lows against the U.S. dollar amid a combination of softer domestic economic data, expectations of further interest rate easing by the Bank of Canada (BoC), and a stronger U.S. dollar. The BoC's recent rate cut and signals of potential additional easing diminished the appeal of Canadian fixed income, while inflation rates remain moderate, giving the central bank room to ease monetary policy. Market participants are also responding to widening interest rate spreads between Canada and the U.S., with Canadian yields falling relative to U.S. treasuries, further pressuring the loonie. Despite some support from rising oil prices—Canada's major export—the broader economic indicators, including declining factory sales and uncertainty surrounding trade negotiations, have weighed on the currency. Technical factors and declining crude oil prices have also contributed to the loonie's losses, with repeated failures to break key resistance levels against the dollar. Overall, a cautious BoC stance balancing growth and inflation, combined with a firm U.S. dollar and economic headwinds, has led to the Canadian dollar's recent decline.