With the election finally behind us, the Trump victory has highlighted and magnified certain trends.  One such trend is the continued weakening Loonie against the U.S. dollar. At the time of this writing (November 15), the Loonie has fallen by 0.9%, touching a four and a half year low of CDN$1.40 per U.S. dollar.

With the Trump administration soon to take over, the markets are pricing in the potential for U.S. tariffs on global imports and stimulus measures through tax cuts and deregulation. Altogether, these are interpreted as positive developments for the U.S. dollar. It is also important to note that the currency markets appear to believe that the Loonie may not weaken as much other global currencies. Afterall, Canada's proximity to the US should benefit from a strong US economy and our special relationship with our neighbors could exempt Canada from tariffs. For example, many believe that Canadian crude oil could be exempt from further taxes as many U.S. refineries rely on Canadian oil. The auto industry is also another area that may be exempt as the Canadian government’s policies on Chinese imports align well with U.S. foreign policy. However, the divergence on interest rate paths between the two countries continues to impact the currency pairing. If the US Fed is slow to cut rates, while the Bank of Canada continues a more rapid pace of cuts, we can expect the Canadian dollar to head lower.

From a technical perspective, our analysts would not be surprised if the Loonie continues to weaken against the U.S. dollar. It has gone below support levels of 0.72 and any further breakdown will go towards 0.70 and potentially 0.68.

In short, the only consolation is that our Loonie may be the best of the weaker currencies.