THUNDER BAY – BUSINESS – The Canadian dollar dropped slightly against the U.S. dollar on Thursday after new data showed that retail sales in Canada fell in May. However, the drop in the loonie was small, as investors are waiting for the Bank of Canada’s next interest rate decision next week.
By late afternoon, the loonie was down 0.3% and trading at 1.3635 per U.S. dollar, or 73.34 U.S. cents. Earlier in the day, it traded between 1.3592 and 1.3646. On Wednesday, the Canadian dollar had hit its highest point since July 4.
Retail sales in Canada went down by 1.1% in May compared to April. Canadians spent less on cars, groceries, convenience store items, and alcohol. However, an early estimate for June shows sales may have bounced back by 1.6%.
“This drop shows the Canadian economy might be slowing down, but the market isn’t reacting too strongly yet,” said Tony Valente, a senior foreign exchange dealer at AscendantFX. “People think the Bank of Canada will keep its interest rate at 2.75% next week because inflation is still a concern.”
The Bank of Canada hasn’t changed its interest rate since March, after cutting it by 2.25 percentage points over the past nine months. Most investors believe the rate will stay the same next week and expect very little change by the end of 2025.
Even with Thursday’s dip, Valente said the Canadian dollar is still holding up well. This is partly because investors are feeling more confident and the U.S. dollar is starting to weaken against other major currencies.
Meanwhile, the U.S. dollar gained back some strength after dropping earlier in the week. Oil prices also rose by 0.8% to $65.75 a barrel, thanks to hopes for better U.S. trade deals and a big drop in American oil supplies. Oil is one of Canada’s main exports.
Canada’s 10-year government bond yield was steady at 3.546%, after hitting a one-week high of 3.614% earlier in the day.
