The Canadian dollar is slumping against its U.S. counterpart as markets anticipate further interest rate cuts from the Bank of Canada this year.
The loonie is trading 0.2% lower at 72.73 U.S. as the American greenback strengthens after the U.S. Federal Reserve on June 12 declined to lower interest rates and signalled that there’s likely to be only one rate cut in 2024.
In contrast, the Bank of Canada on June 5 lowered interest rates by 25 basis points, with central bank officials saying more rate reductions are likely in coming months.
Canada is the first G7 country to lower interest rates since the onset of the Covid-19 pandemic in 2020.
In a speech delivered on June 13, Bank of Canada Deputy Governor Sharon Kozicki said that further interest rate cuts are likely this year if inflation continues to decline.
Futures traders are placing 55% odds of an interest rate cut at the Bank of Canada's next policy meeting scheduled for July 24.
Declining oil prices are also weighing on the Canadian dollar as crude is one of Canada's major exports.
Currently, West Texas Intermediate (WTI) crude oil, the U.S. standard, is trading at $79.08 U.S. per barrel, down from more than $85 U.S. at the start of the year.
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