How Does Canada Respond to a 25% Tariff Hike? Through a C$1.60 Loonie!

Weak growth, rate cuts, and tariff threats are bearish for the Canadian dollar

Highlights

• Weak growth, rate cuts, and tariff threats are bearish for the Canadian dollar

• We expect a soft CPI report based on falling rents and retail discounting

• But, keep an eye on food prices as a potential monkey wrench in the data

• Monthly GDP data show a deceleration in the U.S. economy (contrary to popular belief)

Key Takeaways

U.S. Stocks: Caution Sets In

• For all the chatter of a broadening out in the U.S. stock market, the equal weight comparable has fallen for four straight days and now finds itself sitting below the 21-day trendline. A dose of caution has emerged, especially in the growth space.

Bond Yields Wait for CPI

• Bond markets are little changed ahead of today’s key CPI data, though with a mild downward tilt in yields across the Atlantic. Despite all the anticipation over further Chinese policy stimulus, the 10-year benchmark yield there has dropped -2 basis points to 1.82%.