Canadian Dollar Slides to 14-Month Low

The Canadian dollar fell to its weakest level in 14 months against the U.S. dollar on Friday, pressured by declining oil prices and fresh retail sales data that pointed to persistent weakness in underlying consumer demand.

The loonie dropped 0.3% to C$1.4180 per U.S. dollar, or 70.52 U.S. cents, extending its losing streak to a seventh consecutive session. During intraday trading, the currency touched C$1.4183, its lowest level since April last year.

The currency has lost approximately 1.3% over the past week, as broad-based strength in the U.S. dollar continued to gain momentum following the Federal Reserve’s increasingly hawkish stance on interest rates.

Statistics Canada reported that overall retail sales rose 0.5% in April from the previous month. However, core retail sales, which exclude gasoline stations, fuel vendors, automobile dealers, and auto parts retailers, fell 0.7%, marking a second consecutive monthly decline and underscoring soft consumer spending trends.

Preliminary estimates indicated that retail sales likely rebounded by 1% in May, but analysts cautioned that underlying demand remains fragile.

“April’s reports suggest inflation continued to support nominal retail sales while core demand remained subdued,” said Maria Solovieva, economist at TD Economics, in a research note.

Solovieva added that elevated energy costs have continued to erode consumers’ purchasing power throughout much of the current quarter. As a result, consumer spending growth is expected to slow to an annualized quarterly rate of 0.5% in the second quarter, down sharply from the 1.5% pace recorded in the first quarter.

Beyond higher energy prices, Canadian consumers have also faced mounting uncertainty surrounding trade conditions and a prolonged slowdown in the housing market. Those factors have prompted investors to scale back expectations that the Bank of Canada will raise interest rates later this year.

Analysts at Monex Europe said in a note to clients that the USD/CAD currency pair is likely to remain above the 1.40 threshold as geopolitical risk premiums continue to fade from oil markets and the Federal Reserve maintains its hawkish policy bias.

Oil, one of Canada’s most important export commodities, has fallen roughly 9% since last Friday in U.S. markets. The decline followed a ceasefire agreement between Israel and Hezbollah, easing concerns over potential disruptions to Middle East crude supplies and raising hopes for broader regional de-escalation involving the United States and Iran.

Lower oil prices typically weigh on the Canadian dollar, given the country's significant dependence on energy exports.

In bond markets, Canadian government yields posted mixed performances along a steeper yield curve. The benchmark 10-year government bond yield rose 1.8 basis points to 3.392%, reflecting continued adjustments in investor expectations for growth and monetary policy.