Loonie Takes a Hit from Trade Jitters and Soft Data

Rosenberg Research's analysis suggests that trade jitters and softer domestic data are weighing on the Canadian dollar, also known as the loonie. The firm highlighted a recent release showing Canada's preliminary wholesale trade fell 1.5% month over month in August.

This decline in demand has led to doubts about the Bank of Canada's ability to deliver several more rate hikes. According to Rosenberg, investors are starting to question whether the central bank can follow through on its plans if growth is softening.

Rosenberg tied this doubt to household strain, citing a National Payroll Institute survey that found 28% of working Canadians live paycheck to paycheck and 44% say they're financially stressed. When investors think the BoC will end up less hawkish than expected, Canada's projected short-term interest rate path tends to fall relative to the US.