The Canadian dollar weakened against its U.S. counterpart on Thursday as the greenback notched broad-based gains and after domestic retail sales data failed to lift investor concern about Canada’s economic outlook.
The loonie was trading 0.2 per cent lower at 1.4125 per US dollar, or 70.80 US cents, after touching its weakest intraday level since July 14 at 1.4149.
“The loonie’s slide looks more like a rates-and-USD story than a sudden Canada-specific shock,” said Tony Valente, a senior FX dealer at AscendantFX.
The U.S. dollar rose to a two-month high against a basket of major currencies as investors bet on additional Federal Reserve interest rate hikes following recent strong economic data.
“The lack of a trade and tariffs agreement with the US isn’t helping the cause either,” Valente said. “That uncertainty is weighing on the Canadian growth outlook and limiting the Bank of Canada’s room to move, with this morning’s disappointing domestic retail sales data adding to the evidence of softer domestic demand.”
Canadian retail sales fell by 0.7 per cent in July, led by declines at general merchandise retailers. A preliminary estimate showed sales rebounding by 1.3 per cent in August but analysts don’t expect to see sustained strength.
“We doubt the momentum can last given renewed trade tensions that are set to cause the unemployment rate to rise, while elevated gasoline prices will also eat into discretionary spending power in the near term,” Katherine Judge, a senior economist at CIBC Capital Markets, said in a note.
U.S. crude oil futures were trading 2.3 per cent higher at US$94.25 a barrel as the U.S. and Iran discussed a phased deal to reopen the Strait of Hormuz and per cent end a US blockade. Oil is one of Canada’s major exports.
Canadian bond yields were mixed across a steeper curve, tracking moves in U.S. Treasuries.
The 2-year eased 1.6 basis points to 3.384 per cent, while the 10-year was barely changed at 3.956 per cent after earlier touching its highest level since November 2023 at 3.990 per cent.