Here’s what the Bank of Canada’s rate drop means for the loonie

The Canadian economy is also increasingly service-based, so inflation is less affected by import trends, he said. Even categories like imported food are affected by domestic retail costs, limiting the outside effects. How stable has the Canadian dollar been through this interest rate cycle? The Canadian dollar has been fairly rangebound between 72 and 76 cents for the past two years, marking a pretty long stretch of relatively stability, said Sondhi. “It’s actually been pretty a remarkably stable currency … it’s obviously on the lower end of that range right now, so it’s still low, but I think it’s important to note that it has been rangebound.” What’s ahead for the loonie? The Canadian dollar should hold around where it’s been trading for the rest of the year, said Sondhi, because both the Bank of Canada and the U.S. Fed will be cutting. TD has forecast a year-end target for the Bank of Canada rate to be at 4.25 per cent by year end, but the dovish tone from the bank leaves room for it to go lower still. Financial markets have fully priced in the first U.S. rate cut in September, while the Fed also has decision meetings scheduled in November and December. This report by The Canadian Press was first published July 24, 2024.