Loonie drops sharply on risk key interest rate will be slashed
North American stock markets moved solidly higher Monday morning while the loonie declined more than half a U.S. cent.
Toronto’s S&P/TSX composite index was up 144 points at 14,555 shortly before noon, building on a 132-point gain on Friday. The gains are largely the result of a new deal agreed upon by Greece and its European creditors that will see the Mediterranean country avoid default.
On U.S. markets, the Dow Jones industrial average was up 197 points while the Nasdaq index rose 61.38 points to 5,059.08, and the S&P 500 advanced 20 points or one per cent.
While markets are heading up, the loonie is moving fast in the opposite direction. The loonie traded at 78.33 cents US, down 0.54 of a U.S. cent from Friday’s close.
“The Canadian dollar remains soft entering the week,” Rahim Madhavji, an analyst at Toronto-based Knightsbridge Foreign Exchange, said in a note to clients.
The loonie is losing ground ahead of a highly anticipated rate announcement from the central bank scheduled for Wednesday. Experts suggest the Bank of Canada could cut its key rate to provide a jolt to an economy that may have just slipped into recession.
“Near-term Canadian dollar risk lies with Wednesday’s Bank of Canada meeting, where a rate cuts remains possible in response to sluggish domestic economic data of late,” Madhavji said.
On the commodity markets, oil dropped 46 cents to US$52.28 a barrel.
WATCH: The bad news is piling up for Canada’s economy.