Canadian Dollar Hits 14-Month Low
The Spin
Government-critical narrative
The Canadian dollar is in serious trouble, hitting 14-month lows as the Fed signals rate hikes while the Bank of Canada sits on its hands at 2.25%. A technical recession, falling oil prices and a weakening consumer are hammering the loonie from every direction. With the U.S.-Canada yield spread widening and USMCA uncertainty looming, there's no floor in sight for Canada's currency.
Pro-government narrative
The Bank of Canada is right to hold rates steady and let the loonie absorb the pressure from Fed tightening. Underlying inflation is soft, the economy is weak and a negative output gap means demand isn't driving prices up. A weaker Canadian dollar doesn't historically spark serious inflation, so there's no compelling reason to hike rates just because the Fed does.