After the U.S. elected Donald Trump, the Canadian dollar (FXC) fell sharply. In August, markets bid the loonie higher. It looked like it would find support at $0.72 and break out toward $0.74.
Unfortunately, Trump’s tariffs would disrupt Canada’s exports to U.S. markets. The country needs to rectify claims of illegal migrants entering the U.S. from Canada. More recently, Canada plans to tighten security, restrict immigrants, and turn down asylum seekers.
Experts are now forecasting the USD-CAD rate to fall to $0.66 or lower. $0.68 is more realistic: it would re-test the lows not seen since 2016 and during the pandemic.
Oil Prices Weaken
Weak oil prices are not helping the Canadian dollar. WTI crude fell again in the last week, closing at $67.20. Investors are also expecting the global economy to weaken. Resource firms like Vale (VALE), BHP Group (BHP), and Canada’s Teck Resources (TECK) continued their downtrend.
Investors are not expecting Canada to resolve its trading conflict with the U.S. As a result, the chances are high that the U.S. will impose tariffs in 2025.
Mexico may have a better chance of negotiating a trade deal with the U.S. Last week, iShares MSCI Mexico (EWW) gained 2.84%. iShares MSCI Canada ETF (EWC) dropped by 0.86%.
