The Canadian dollar is trading near levels last seen in the aftermath of the "Liberation Day" United States tariff announcement in April 2025, Corpay Currency Research said on Thursday.
The move reflects a sharp widening in two-year US-Canada yield spreads since early May, driven by a more hawkish US policy repricing, ongoing trade tensions, weakness in Canada's housing market, and expectations the Bank of Canada will look through energy-driven inflation, given subdued growth, said Karl Schamotta, chief market strategist at Corpay.
However, the decline looks stretched, added Schamotta. From a technical perspective, the Canadian dollar is at extremely oversold levels last seen in 1985, suggesting the recent decline may have gone too far.