If the U.S. Central bank signals another rate cut in December, or if it goes against expectations and chops rates by 50 basis points, it could pull the rug out from under an already unsteady U.S. dollar and clear the way for the Canadian currency to shoot higher.
Loonie Set to Surge Further
The Canadian Dollar, or Loonie, recently cleared a 47-year high against the US Dollar. Its next major milestone is crossing a level last seen in the late 19th century! There are a few reasons for the Loonie’s continued strength, namely interest rate parity and economic strength. As a result of the Fed cutting rates for the second time in as many months, the Canadian benchmark interest rate is now equal to the American federal funds rate, both at 4.5%. In addition, record-breaking oil and commodity prices will ensure that Canada’s economy will expand further, perhaps as the same pace as its currency. Reuters reports:
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