Loonie slides on US dollar strength and falling oil; services sector shows signs of resilience
The Canadian dollar slipped to its weakest level since April as a combination of US dollar strength and falling oil prices weighed on the loonie, according to Reuters.
The currency traded at 1.4115 per US dollar, or 70.85 US cents, after breaching a key technical resistance and touching 1.4140 intraday.
Analysts at CIBC Capital Markets noted that the move was “likely technical in nature” after the USD-CAD pair broke above the 1.4080 resistance, with post-Federal Reserve momentum boosting the greenback against most major currencies.
Adding to the pressure, US crude oil futures settled 1.6 percent lower at $59.60 a barrel, as concerns of a potential global oil glut persisted.
This decline in oil, one of Canada’s major exports, further dampened sentiment for the Canadian dollar.
Meanwhile, Canadian bond yields rose across the curve, tracking US Treasuries, with the 10-year yield up 1.9 basis points at 3.153 percent.
However, the gap between Canadian and US 10-year yields widened to about 100 basis points—the largest since June 24—reflecting diverging economic outlooks.
On the economic front, Canada’s services sector showed resilience, expanding in October for the first time in nearly a year.
S&P Global’s Canada services PMI reported the Business Activity Index rose to 50.5, up from 46.3 in September, signalling that businesses are adapting to ongoing economic uncertainty.
In the broader currency markets, Reuters reported that the US dollar retreated in early Asia trade as investors reacted to private sector data pointing to a possible cooling in the US labour market.
The dollar index fell 0.5 percent to 99.674, reversing earlier gains, as traders increased bets on a US Federal Reserve rate cut at the next meeting.
According to Westpac, “US Challenger jobs data indicated a spike in US job cuts, suggesting a possible cooling in US labour market conditions.”
