Yesterday was a surprising day for the Canadian dollar, dropping to six-year lows against the US dollar, after the Bank of Canada cut interest rates by 0.25%. This was mainly due to the recent sharp drop in oil prices and a few disappointing pieces of data, including Tuesday’s poor manufacturing. The central bank said that the recent hit in oil prices over the past six months would be a real negative for growth, in turn affecting inflation in Canada. Now the Canadian dollar expects lower oil prices to boost global economic growth, however, this has certainly been the case in the United States, driving an ever increasing disparity between the two neighbouring economies.
More ominous data is in store for the rest of the week, with the release of Consumer Price Index data on Friday, at a figure forecast to come out at -0.4% – down from last month’s figure of -0.2%. This reflects a steady decline for the Canadian economy.