Summary:
The Canadian dollar rebounded from an 11-week low on Thursday after the BOC cut rates significantly, while the greenback extended its gains.
The Canadian dollar recovered from an 11-week low on Thursday after the BOC cut interest rates by an unusually large amount and the greenback added to its recent broad-based gains.
The central bank has lowered its benchmark rate by 50 basis points (bps), confirming expectations and signaling a return to a low-inflation era in Canada. This marks a total easing of 125 bps since June. Market analysts anticipate an additional 50 bps cut as early as January, especially following a 1.0% decline in Canadian exports in August, largely due to reduced energy product sales.
Meanwhile, the U.S. dollar has achieved its 16th gain in 18 sessions, as positive economic data and Trump’s political resurgence have tempered expectations for rapid Federal Reserve rate cuts. Goldman Sachs forecasts that oil prices will average $76 per barrel by 2025, citing a moderate crude surplus and ample production capacity among key suppliers, alleviating concerns over potential disruptions in Iranian oil supply.
In the U.S., crude oil inventories saw a significant increase last week due to rising imports, while gasoline stocks unexpectedly climbed as refineries increased output after completing seasonal maintenance, according to EIA data.
Loonie may weaken towards 1.39 per dollar in the immediate term but a reversal appears to be in the making given the RSI reading and its trading pattern over the past year.
Disclaimer: This material is for general information purposes only and is not intended as (and should not be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by EBC or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.
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