As we move towards the close of 2024, Canada’s foreign exchange market has been shaped by a combination of domestic economic data, international trade uncertainties, and currency movements. Here’s a recap of the major developments in Canada’s FX landscape in November:

Canadian Dollar (CAD) Experiences Volatility

In November 2024, the Canadian dollar faced significant headwinds, ending the month lower against the U.S. dollar. This was largely driven by falling oil prices and a widening yield spread between U.S. and Canadian bonds.

• CAD Weakens: The loonie dropped to a 4.5-year low against the U.S. dollar, primarily impacted by weaker oil prices, which form a crucial part of Canada’s exports. The broader market sentiment was also influenced by growing concerns over Canada’s economic outlook.
• Partial Recovery: Towards the end of the month, the CAD saw some recovery as U.S. President-elect Donald Trump announced controversial tariff proposals, which initially created volatility in the market. The Canadian dollar managed to rebound after the shock.

Key Economic Indicators:

• Producer Prices: Canada’s producer prices increased by 0.6% in November. However, this was tempered by a depreciation of the CAD against the USD by 1.6%, putting additional pressure on local businesses.
• GDP Growth: Canada’s GDP expanded at a slower-than-expected 1% in the third quarter of 2024. This below-forecast growth raised speculation that the Bank of Canada might implement a larger-than-anticipated interest rate cut in December.

Trade Relations & Tariffs:

• U.S.-Canada Trade Tensions: The biggest news in November was the announcement by U.S. President-elect Donald Trump regarding a proposed 25% tariff on Canadian imports. This announcement spooked markets and added to uncertainty about the future of U.S.-Canada trade relations.

Looking Ahead:

The outlook for the Canadian dollar remains clouded by a mix of domestic and international factors. Key events to watch include:

• Bank of Canada’s Policy Decisions: The potential for an interest rate cut in December could provide some support to the CAD, but further pressure from trade tariffs and low oil prices could keep the currency on edge.
• Global Economic Conditions: As the world’s largest exporter of crude oil, fluctuations in oil prices will continue to be a significant driver of the Canadian dollar’s value.

“In times of economic uncertainty, currencies fluctuate, but resilience in strategy and adaptation to change remain the true constants.”

Conclusion

November 2024 was a turbulent month for Canada’s foreign exchange market, with the Canadian dollar facing downward pressure from economic concerns and global trade tensions. As we head into December, the key factors to watch will be developments in the global oil market and the Bank of Canada’s policy stance.