Canadian dollar struggles to rise above 71.10 U.S. cents
- The Canadian dollar traded at 71.10 U.S. cents, distancing itself from a 4-1/2-year low.
- Oil prices fell by 2% to $68.54 a barrel, amid anticipation of an OPEC+ decision.
- Investors expect further monetary easing from the Bank of Canada amidst current economic trends.
On Wednesday, December 4, 2024, the Canadian dollar (CAD) maintained a steady position against its U.S. counterpart, the dollar (USD), remaining away from a recent significant low. The loonie was valued at 71.10 U.S. cents, trading marginally unchanged at 1.4065 per USD, which reflects a more stable performance compared to the weakest rate observed since April 2020—1.4177—recorded the previous month, as concerns about U.S. trade tariffs intensified. This period of stability comes at a time when oil prices, one of Canada's most critical exports, experienced a downturn, closing approximately 2% lower at $68.54 a barrel due to awaiting news on impending OPEC+ decisions on supply. Amidst these economic fluctuations, Federal Reserve Chair Jerome Powell addressed the U.S. economy’s robust conditions relative to previous months. His statement, delivered during a market analysts' session, indicated that U.S. economic strength observed in September may lead policymakers to adopt a more cautious approach in regards to interest rate cuts. Nevertheless, market consensus remains strong around the expectation that the Federal Reserve is likely to implement rate cuts during their next meeting on December 18. These economic conditions have left investors feeling apprehensive regarding the financial market's future direction, contributing to the increased anticipation surrounding further monetary policy adjustments by the central banks involved. Furthermore, additional indicators shown in S&P Global’s Canada services PMI data revealed a modest expansion in Canada’s services economy, reflecting growth for the second consecutive month in November. The business activity index increased to 51.2 from the previous month's mark of 50.4, suggesting an overall improvement in business activity and staff hiring within the sector. In contrast, the Bank of Canada seems poised for yet another easing cycle, as speculation surrounds an upcoming interest rate decision next week, particularly with the market pricing in a roughly 50% probability for an anomalously significant cut of 50 basis points. In response to these developments, Canadian bond yields also saw parallels with movements in U.S. Treasuries, reflecting broader market trends within fixed-income securities. The 10-year Canadian bond yield registered a decrease of 3.2 basis points, landing at 3.086 percent, illustrating the interconnectedness of the Canadian and U.S. markets amid fluctuating economic conditions and investor sentiment.