The Loonie has reached 4-1/2-year low — 71 cents — against the U.S. dollar, and that’s bad news for Canadians struggling under high taxes and rising costs, say analysts.“When Trudeau won in 2015, the Canadian dollar traded at about 86 cents U.S.,” said political commentator Brian Lilley on Friday.“So, on top of inflation making everything more expensive to buy, your dollar has a lower purchasing power. And (Trudeau) has several taxes that increase automatically.” Even though a weaker Canadian dollar can benefit certain sectors of the economy like exports and tourism, it causes financial hardship for Canadians, from higher domestic prices to increased import and financing costs and other economic pressures that outweigh any perceived benefits, reported Morningstar.“The most visible impact is on the goods imported from south of the border,” they wrote. “When you make an online purchase from a U.S. retailer, a US$100 item could cost you about $137, and more if the loonie slips further. In some cases, Canadian consumers will pay higher prices even when shopping locally. When Canadian retailers purchase goods from the U.S., the higher costs due to the exchange rate are often passed on to consumers."Meanwhile, Canada's standard of living is falling, reported the Fraser Institute.“According to a recent study, from the middle of 2019 to the end of 2023, GDP per person fell from $59,905 to $58,134 — a 3.0% drop over four and a half years,” wrote the Institute.“Unfortunately for Canadians, this recent decline in living standards persisted through the first three months of 2024.”Investors are weighing U.S. inflation numbers and the possibility of a wider separation in economic growth between the U.S. and Canada, reported Reuters, noting the Bank of Canada expects the Canadian economy to grow 1.2% this year compared to 2.8% in the U.S.“The biggest driver of the split between the Canadian and U.S. dollar is the diverging economic outlooks, and the interest rate decisions linked to those,” reported the Financial Post. “That’s because the higher the central bank interest rate, the more worthwhile it is to hold that country’s currency.”
The Loonie has reached 4-1/2-year low — 71 cents — against the U.S. dollar, and that’s bad news for Canadians struggling under high taxes and rising costs, say analysts.“When Trudeau won in 2015, the Canadian dollar traded at about 86 cents U.S.,” said political commentator Brian Lilley on Friday.“So, on top of inflation making everything more expensive to buy, your dollar has a lower purchasing power. And (Trudeau) has several taxes that increase automatically.” Even though a weaker Canadian dollar can benefit certain sectors of the economy like exports and tourism, it causes financial hardship for Canadians, from higher domestic prices to increased import and financing costs and other economic pressures that outweigh any perceived benefits, reported Morningstar.“The most visible impact is on the goods imported from south of the border,” they wrote. “When you make an online purchase from a U.S. retailer, a US$100 item could cost you about $137, and more if the loonie slips further. In some cases, Canadian consumers will pay higher prices even when shopping locally. When Canadian retailers purchase goods from the U.S., the higher costs due to the exchange rate are often passed on to consumers."Meanwhile, Canada's standard of living is falling, reported the Fraser Institute.“According to a recent study, from the middle of 2019 to the end of 2023, GDP per person fell from $59,905 to $58,134 — a 3.0% drop over four and a half years,” wrote the Institute.“Unfortunately for Canadians, this recent decline in living standards persisted through the first three months of 2024.”Investors are weighing U.S. inflation numbers and the possibility of a wider separation in economic growth between the U.S. and Canada, reported Reuters, noting the Bank of Canada expects the Canadian economy to grow 1.2% this year compared to 2.8% in the U.S.“The biggest driver of the split between the Canadian and U.S. dollar is the diverging economic outlooks, and the interest rate decisions linked to those,” reported the Financial Post. “That’s because the higher the central bank interest rate, the more worthwhile it is to hold that country’s currency.”
