The Canadian Dollar (CAD) traded near its lowest level since April 2025 on Friday, pressured by weaker-than-expected retail sales data and declining oil prices [1]. USD/CAD hovered around 1.4170, marking its highest point since April 2025, as Statistics Canada reported that retail sales rose only 0.5% in April, down from a 0.9% increase in March and below the 0.6% consensus forecast [1]. Retail sales excluding automobiles increased just 0.1%, missing the 0.7% forecast, and March's reading was revised down to 1.2% from 1.4% [1].
The Canadian Dollar also faced headwinds from diverging monetary policy outlooks between the Bank of Canada (BoC) and the Federal Reserve (Fed). At this week's policy meeting, the Fed reiterated its commitment to returning inflation to its 2% target, with nine of 19 policymakers projecting at least one rate hike this year [1]. Markets priced in a 70% chance of a September rate hike, according to CME FedWatch data, which supported the US Dollar [1]. The US Dollar Index (DXY) traded around 100.81 after reaching 101.13 earlier in the day, its highest since May 2025 [1].
In contrast, Canadian inflation pressures remain relatively contained. The BoC noted that US tariffs argue for lower rates, but persistently high energy prices could justify consecutive increases in the policy rate [1]. However, with oil prices retreating after a US-Iran truce, the case for rate hikes has weakened. West Texas Intermediate (WTI) crude traded around $75.50 per barrel, its lowest since March 5, further pressuring the commodity-linked Loonie [1].
On the day, the Canadian Dollar was the strongest against the Swiss Franc but weakened against most other major currencies, including a 0.23% decline versus the US Dollar [1].
CONCLUSION
The Canadian Dollar's decline to its lowest level since April 2025 reflects a combination of weak domestic retail sales, falling oil prices, and a more hawkish US Federal Reserve stance. Market sentiment remains negative for the CAD, with further downside possible if these pressures persist.