Canadian Dollar Eases from 16-Month Highs

The Canadian dollar has eased back toward 1.355 per US dollar after failing to sustain gains at sixteen-month highs, as softer domestic growth signals and renewed US dollar strength reversed part of January’s rally. Recent Canadian data showed real GDP flat in November, with a third contraction in four months across goods-producing industries led by a deepening slump in manufacturing, underscoring that underlying momentum remains fragile even as services provide only limited offset. This backdrop has reinforced expectations that the Bank of Canada can afford to remain cautious rather than turn more restrictive, a view echoed in its latest decision to hold rates steady while stressing data dependence and lingering excess supply in its forward guidance. At the same time, the pullback was amplified by a firmer US dollar after political and trade headlines revived demand for USD liquidity.