Canadian dollar falls more than 1 cent ahead of Bank of Canada decision
Weak manufacturing data reduces value of Canadian dollar
The Canadian dollar fell more than a cent against the U.S. dollar today, at one point hitting its lowest level since April 2009.
According to the Bank of Canada's official closing rate, the loonie fell 1.1 cents against the U.S. dollar today, closing at just under 82.6 cents US.
"The market is worried the Bank of Canada will hint at interest rate cuts tomorrow," said Adam Button, a currency analyst with ForexLive.com.
"It's an ongoing story of weakness in oil and strength in the U.S. economy that hasn't spilled across the border," added Button.
- Morgan Stanley: Canada has 1 in 3 chance of interest rate cut in 2015
- Get ready for interest rate shock in 2015
Data released by Statistics Canada on Tuesday morning showed November manufacturing sales dropped 1.4 per cent, the second monthly decline in a row. The weak result is one of the last economic indicators to cross Bank of Canada governor Stephen Poloz's desk before the central bank makes an interest rate announcement on Wednesday morning, says Button.
If the Bank of Canada hints that it might cut interest rates in the near future, the Canadian dollar could slide further.
The central bank has kept its key rate at one per cent for 34 consecutive decisions.
U.S. investment bank Morgan Stanley recently said it sees a one in three chance that the Bank of Canada will cut interest rates before year's end.
Keeping an eye on the Bank of Canada
In a research note to clients, Scotiabank's chief foreign exchange strategist Camilla Sutton laid out what currency traders will be looking for in the Bank of Canada's next monetary policy report:
- A shift toward "a slightly more dovish bias" in monetary policy, meaning that interest rates are likely to stay low or be cut further.
- A cut to the bank's GDP forecasts, which haven't been revised to reflect the most recent drop in oil prices.
- Any reduction to the bank's inflation forecasts.
- The bank's take on the effects of low oil prices, and how that might be eased by a growing U.S. economy and a falling Canadian dollar that could boost exports.
- Other risks, including to the housing market, the oil industry, from high levels of household debt and risks to global economic growth.
The Bank of Canada's quarterly monetary policy report will be released at 10 a.m. ET on Wednesday.
Corrections
- An earlier version of this story reported that Canadian manufacturing sales declined for the third consecutive month in November. In fact, it was the second consecutive monthly decline in manufacturing sales.Jan 20, 2015 3:59 PM ET