Bad news has been the word for currency exchange Ottawa and across Canada as the Canadian dollar or the loonie has been weakened to the lowest it’s been in over two months, especially compared to its US cousin on the 28th of May, following a drop in oil prices and investors forecasted that the Bank of Canada will fall behind the Federal Reserve with their interest rate hikes.
US’s oil prices dropped by 2.1% percent to $66.47/barrel as Saudi Arabia and Russia revealed that they might be looking into upping their supplies while the US oil production continues to go up. The resulting decline has left oil, one of Canada’s key exports, nearly 9% below last week’s record setting $72.83/barrel, a 3 and a half year high.
A slowdown in Canada’s real estate market, as well as the increasing gap between it and US’s interest rates have put serious pressure on the loonie, according to the Portfolio Manager at Picton Mahoney Asset Management, Michael White. He says that, from the current perspective, it seems wiser to have a lower-valued loonie.
People in the currency exchange Ottawa industry are waiting for the Bank of Canada to announce their interest rate decision at the 30th of May, Wednesday. A poll from Reuters forecasted that they’ll probably keep the interest rates steady as the current environment, high on indebted consumers and uncertainty, demand caution.
Currently, Canada’s central bank’s benchmark policy rate is at 1.25%, while the Federal Reserves’ target range is from 1.50% to 1.75%, with currency experts already expected the Fed to take their rate up in June.
Canada’s Foreign Affairs Minister Chrystia Freeland will be headed to Washington before June to unblock talks regarding the North American Free Trade Agreement, according to a spokesperson. It’s important for the country to make sure NAFTA does not collapse as 75% of Canada’s exports go to the United States.
At 3:41PM (EDT), the Canadian dollar recorded at a trading value of $1.2996 to the greenback or 76.95 US cents, 0.1% lower, which is the weakest value its hit since 21st March, when its trade value sat at $1.3022.