Loonie Slumps as US Treasury Yields Surge, Oil Prices Weaken

The Canadian Dollar continues to struggle, weighed down by rising US Treasury yields that have widened the interest-rate advantage for the greenback. Markets are now pricing three Fed rate increases by March 2027, a path the Bank of Canada may find difficult to match given the weakness in the Canadian economy and the additional drag from Trump's tariffs.

The jump in US Treasury yields has pushed the yield on the 10-year bond to its highest since 2007, surging to 5.19% overnight. This shift in expectations for Fed policy has put downward pressure on the Loonie, which is trading at around 1.4139 against the USD.

Meanwhile, oil prices are also under pressure, with WTI falling from 96.75 to 92.65 this morning, after reports that Washington and Tehran discussed a phased arrangement that could eventually restore traffic through the Strait of Hormuz.