Loonie Slips Amid Strong Canada GDP and Tighter Fed Policy

The Canadian dollar has weakened against the US dollar despite strong economic growth in Canada. The Loonie fell to 1.39 per USD from a three-month high of 1.376 reached on August 21st, influenced by a more restrictive policy signal from Fed Chair Warsh.

Warsh said the Federal Reserve is tracking the PCE index as an inflation gauge, using firmer rhetoric than earlier suggestions that a newly created task force could shift the central bank's preferred measure.

Rate futures shifted towards pricing a potential Fed rate hike next month, which would widen the US-Canada rate differential, making US assets more attractive and putting further pressure on the Canadian dollar.