Loonie Posts Longest Losing Streak in 21 Months
Toronto, ON – December 2021
The Canadian dollar on Tuesday fell to its lowest level in nearly three months against the greenback, as concerns about the Omicron variant dampened investor sentiment and ahead of a government fiscal update that could show limited new spending.
Global shares fell, and the U.S. dollar rose to a near one-week high as investors nervously eyed the spread of the Omicron variant and awaited numerous central bank decisions due this week.
The Impact of Omicron on the Canadian Dollar
"The increased concerns from public health officials are weighing on sentiment, not only here in Canada but abroad," said Michael Goshko, corporate risk manager at Western Union Business Solutions. "There’s so much uncertainty. It’s not surprising to see commodity currencies like the Canadian dollar get harmed in an environment like this."
The price of oil, one of Canada’s major exports, declined as the International Energy Agency said the new variant was set to dent the global demand recovery.
U.S. Crude Futures and the Canadian Dollar
U.S. crude futures settled down 0.8 per cent at US$70.73 a barrel, while the Canadian dollar was trading 0.4 per cent lower at 1.2855 to the greenback, or 77.79 U.S. cents, after touching its weakest level since Sept. 20 at 1.2863.
The Longest Losing Streak Since March 2020
It was the fifth straight day of declines for the currency, the longest losing streak since March 2020. Prime Minister Justin Trudeau’s government is due to outline new fiscal and economic forecasts at 4 p.m. ET (2100 GMT) on Tuesday.
Inflation Surging in Canada
With inflation surging, some business groups and opposition politicians have called for more spending restraint. Investors were also awaiting a potential decision on faster tapering from the Federal Reserve on Wednesday.
Canadian Government Bond Yields
Canadian government bond yields were higher across the curve. The 10-year rose 4.1 basis points to 1.438 per cent, after touching its lowest level in 2-1/2 months at 1.389 per cent.
The Impact of Central Bank Decisions on the Canadian Dollar
Investors are closely watching central bank decisions due this week, including a potential decision from the Federal Reserve on Wednesday. The Bank of Canada has also announced that it will keep its inflation target as risks mount.
The Relationship Between Household Net Worth and Food Banks in Canada
As household net worth rises in Canada, so do the lines at food banks. This is a worrying trend for many Canadians who are struggling to make ends meet.
The Economic Forecast and Fiscal Update
The Canadian government’s fiscal update is expected to show limited new spending, which could further dampen investor sentiment. The economic forecast will also be closely watched, as it will provide insight into the country’s economic outlook.
What Investors Can Expect in the Coming Days
Investors can expect a volatile market in the coming days as central bank decisions and government announcements are made. The spread of the Omicron variant will continue to be a major concern for investors.
The Long-Term Impact on the Canadian Economy
While the short-term impact of the Omicron variant on the Canadian economy is uncertain, many experts believe that it will have a lasting impact on the country’s economic growth.
Conclusion
The Canadian dollar has posted its longest losing streak in 21 months, as concerns about the Omicron variant and limited new spending dampen investor sentiment. Investors are closely watching central bank decisions and government announcements, which could further impact the market.
