TSX runs higher on rate cut expectations
Investing.com - The Canadian dollar has emerged as the second-worst performing G10 currency in August, surpassed only by the New Zealand dollar, according to a report released Thursday by ING.
Canada’s economic challenges intensified as the country reported its largest current account deficit on record for the second quarter, driven by declining exports to the United States. This development raises concerns about Canada’s second-quarter GDP figures, with expectations pointing to a 0.7% annualized quarterly contraction.
ING analysts maintain a bearish outlook on the Canadian dollar against European currencies and other commodity currencies, citing Canada’s deteriorating economic prospects as justification for potential additional Bank of Canada (BoC) rate cuts.
While financial markets currently anticipate a BoC rate cut only in December, ING suggests there is a high probability of earlier monetary easing in September or October, followed by another cut in 2026 before reaching a terminal rate of 2.25%.
Despite ING’s generally bearish outlook on the U.S. dollar, which would typically support the Canadian dollar, the bank expects the loonie to underperform compared to other G10 currencies due to Canada’s specific economic challenges.
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