Canadian Dollar Weakens to Five-Week Low Ahead of BOC Decision

The Canadian dollar weakened to its lowest level against its American counterpart in five weeks. The multi-week low comes ahead of the central bank announcing its intentions on interest rates, and the world’s second-largest economy potentially striking a blow to the slowing Canadian economy. The loonie was lifted by a modest bump in energy prices.

On Wednesday, the Bank of Canada (BOC) is expected to leave its benchmark rate at 1.75%, after raising rates 125 basis points since July 2017. The market has not anticipated a rate hike since the central bank confirmed that any further moves will depend on the economic data, and the latest figures suggest Canada is stagnant. But surveys of economists do project just one rate hike by the end of the year.
However, there is now a small chance of the BOC cutting interest rates. This policy decision, though not hinted by Governor Stephen Poloz, would help borrowers and indebted consumers and businesses. But such a policy maneuver would not invoke confidence in the economy, and it would potentially send the loonie lower.
While everyone is concentrating on the US-China trade strife, there is a possibility that Beijing could strike a fierce blow to Canada. It was recently confirmed that China canceled a registration from Richardson International, a major Canadian agricultural business, to ship canola to China. Should the nation’s biggest grain handler get Beijing to reverse its decision, the Canadian economy could hurt.
This comes as China and Huawei Technologies increased pressure on the US and Canadian governments over trade and telecommunications technology. Some contend that the move was meant in retaliation over the criminal charges of Huawei’s chief financial officer, Meng Wanzhou.
Rising energy prices somewhat aided the dollar. April West Texas Intermediate (WTI) crude oil futures tacked on $0.04, or 0.07%, to $56.63 a barrel. April natural gas futures edged up $0.03, or 1.01%, to $2.89 per million British thermal units (btu).
The USD/CAD currency pair rose 0.31% to 1.3344, from an opening of 1.3305, at 17:15 GMT on Tuesday. The EUR/CAD edged up 0.03% to 1.5088, from an opening of 1.5086.

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