The Canadian dollar (CAD) recently experienced a slight downturn as it closed the week around 1.3740 per USD, marking a 0.5% loss. This depreciation coincides with ongoing challenges in Canada’s manufacturing sector, where the S&P Global’s Manufacturing PMI reported a contraction at 48.6. Furthermore, a stronger U.S. dollar and lower oil prices around $57 have added pressure on the loonie.
Overall, the CAD's recent movements have been largely influenced by external factors, particularly U.S. economic performance and commodity prices. Currently, oil is trading at $60.82, which is about 3.2% below its three-month average. As Canada is a leading oil exporter, shifts in oil prices heavily sway CAD's value. A rise in oil prices typically boosts the Canadian economy and strengthens the currency, whereas declines do the opposite.
Looking forward, there is cautious optimism for the CAD due to a recent stronger-than-expected jobs report, showing a net addition of 54,000 jobs in November and a drop in the unemployment rate to 6.5%. Analysts from Scotiabank foresee the USD/CAD rate declining to 1.34 by the end of 2025, driven by a weakening U.S. dollar and favorable Canadian economic conditions. Similarly, CIBC predicts the USD/CAD to reach 1.35 by the same timeframe.
In terms of recent performance against other currencies, the CAD to USD is trading at 0.7274, slightly above its three-month average of 0.718. The CAD to EUR has reached a 90-day high of 0.6217, showing its strength against the euro, while the CAD to GBP is trading at 0.5412, just above its average. The CAD to JPY stands at 114.2, significantly above its three-month average of 111.1.
For those involved in international transactions, staying alert to fluctuations in oil prices, U.S. economic indicators, and Canadian domestic data will be vital in determining the CAD's near-term trajectory.
