David Eng
Investment advisor, CFP, Sonora Wealth Group
“The Canadian dollar continued to face challenges, hovering at a multi-year low as the market sees risks from US President Trump’s trade tariffs and their potential impact on Canada’s economic growth. Despite President Trump’s intentions, the absence of formal action has led to speculation that the administration might adopt a more measured approach, which might ease investor sentiment. In the meantime, Canadian Prime Minister Justin Trudeau has signaled his readiness to respond to any tariffs, adding to the uncertainty clouding the currency’s outlook.
Domestically, December’s Industrial Product Price Index (IPPI) rose by 0.2 percent, marking the third consecutive monthly increase, although the gain was lower than expected. Annually, the index registered a 4.1 percent increase. Higher prices for industrial goods, particularly automobiles and non-ferrous metals like aluminum, played a pivotal role in the increase. The increase in aluminum prices was driven in part by China’s decision to withdraw tax incentives for exports, tightening global supply. Higher commodity prices could help support the Canadian dollar.
At the same time, the Raw Materials Price Index (RMPI) climbed 1.3 percent in December, exceeding initial expectations, and contributing to an annual surge of 9.1 percent. While the index increased, oil markets could remain under pressure due to fears of slowing global growth, should trade tensions escalate. Given Canada’s reliance on crude oil exports, a bearish outlook could further dampen the prospects of the Canadian currency.
Looking forward, looming uncertainty over trade policy and an expected Bank of Canada interest rate cut are likely to keep the Canadian dollar under pressure. Moreover, if upcoming Canadian retail sales data fails to meet expectations, the dollar could see more selling pressure.”
