Canadian Dollar Faces Rough Seas Amid USD Strength And Slowed Manufacturing

What’s going on here?

The Canadian dollar (CAD) weakened by 0.1% against the US dollar (USD), trading at 1.3645 USD after touching its strongest intraday level since May 20 at 1.3604 USD.

What does this mean?

US manufacturing activity slowed for the second consecutive month in May, casting a shadow over US equity markets. Klarity FX’s director highlighted that the downturn in US manufacturing data dragged equities lower, indirectly impacting the CAD. Meanwhile, US crude oil futures fell 3.6% to settle at $74.22 a barrel following OPEC+’s complex deal to extend output cuts. The S&P Global Canada Manufacturing PMI dipped slightly to 49.3 in May, indicating a slowdown in Canadian manufacturing and adding to CAD’s woes. Investors are cautious, anticipating possible

interest

rate cuts by the Bank of Canada (BoC), which are already priced into the swap market.

Why should I care?

For markets: Manufacturing slowdowns ripple through currencies.

Weaker US manufacturing data are hitting North American markets hard. Lower equity values and a slump in US crude oil prices, key economic components, have exerted pressure on the CAD. Canadian

bond

yields also fell in line with US Treasuries, with the 10-year Canadian bond yield dropping 10.6 basis points to 3.524%.

The bigger picture: Interest rates cutting through the fog of uncertainty.

As the BoC contemplates possible interest rate cuts, which investors have already priced in, the CAD faces additional uncertainties. Market players are cautious, avoiding significant moves in the currency until BoC’s policy decision. This careful sentiment underscores the broader nervousness enveloping global financial markets as central banks navigate economic slowdowns.