
Canadian Dollar Faces Mounting Pressure Amid U.S. Economic Strength and Rising Yield Gaps


The Canadian dollar (CAD) has recently come under pressure, sliding to a nearly three-month low against the U.S. dollar (USD). This depreciation is primarily driven by a widening gap between Canadian and U.S. short-term interest rates, a disparity that has reached levels distinctly favouring the USD. This yield gap reflects a broader divergence in economic momentum between Canada and the U.S., contributing to the CAD's recent weakening.
CADUSD H1

Source: TradingView
In the United States, economic performance remains robust. Key economic indicators reveal a strong labour market, with private employment levels hitting their highest point in a year. U.S. GDP growth is also impressive; for Q3 2024, the annualized growth rate hovers close to 3%, underscoring a resilient economy. By contrast, Canada’s economic growth has been subdued, and the Bank of Canada (BoC) projects Canadian GDP growth at only half of the U.S. pace for the same quarter. Statistics Canada data for August and September also suggest that Canada’s growth may be lagging, with estimates pointing to a mere 1% annualized increase. While some of this stagnation is expected to be temporary, the BoC forecasts a modest recovery, projecting Canadian growth to near 2% in the coming months. However, the pace of economic expansion could slow further as the strong boost from immigration—an important factor in Canada’s recent growth—begins to moderate.
The BoC is thus navigating a complex economic landscape. Its focus may increasingly pivot toward inflation, particularly as wage growth and domestic price pressures continue to shape monetary policy. For traders watching the CAD, the BoC’s upcoming December meeting will be a critical event. Many market participants are weighing the potential for a 50-basis-point rate cut, an action that could place even more downward pressure on the CAD. If the BoC adopts a dovish tone, the USD/CAD exchange rate could approach the psychologically significant level of 1.40, especially amid potential shifts in U.S. economic policy around the 2024 elections.
The outlook for the Canadian dollar, therefore, is marked by considerable uncertainty. As it contends with both internal economic constraints and the external influence of a strong U.S. dollar, the CAD’s trajectory over the next several months will depend on the BoC’s monetary strategy, economic recovery signals from Canada, and the broader macroeconomic trends shaping North American markets.
This content may have been written by a third party. ACY makes no representation or warranty and assumes no liability as to the accuracy or completeness of the information provided, nor any loss arising from any investment based on a recommendation, forecast or other information supplies by any third-party. This content is information only, and does not constitute financial, investment or other advice on which you can rely.
Try These Next
Why Is Forex Trading So Difficult?
How To Master MT4 & MT5 - Tips And Tricks For Traders
The Importance Of Fundamental Analysis In Forex Trading
Forex Leverage Explained: Mastering Forex Leverage In Trading & Controlling Margin
The Importance Of Liquidity In Forex: A Beginner's Guide
Close All Metatrader Script: Maximise Your Trading Efficiency And Reduce Stress
Best Currency Pairs To Trade In 2024
Forex Trading Hours: Finding The Best Times To Trade FX
MetaTrader Expert Advisor - The Benefits Of Algorithmic Trading And Forex EAs
LiquidityFinder
LiquidityFinder was created to take the friction out of the process of sourcing Business to Business (B2B) liquidity; to become the central reference point for liquidity in OTC electronic markets, and the means to access them. Our mission is to provide streamlined modern solutions and share valuable insight and knowledge that benefit our users.
If you would like to contribute to our website or wish to contact us, please click here or you can email us directly at press@liquidityfinder.com.