Canadian dollar near multi-week low as economy enters recession

Key facts

• Canada has officially entered a technical recession with consecutive quarters of negative growth.
• Canadian headline inflation rose to 2.8%, primarily driven by energy prices.
• The Canadian dollar lost 2.35% against the U.S. dollar in May.
• The historical correlation between the Canadian dollar and crude oil prices appears to be fracturing.
• The Bank of Canada's interest rate decision is scheduled for June 10th.
• Employment data from both Canada and the U.S. is due on June 5th.

The Canadian economy has officially entered a technical recession, marked by consecutive quarters of negative growth. While headline inflation in Canada recently increased to 2.8%, this rise is largely attributed to energy prices, differing from broader inflationary pressures observed in the United States. In May, the Canadian dollar depreciated by 2.35% against the U.S. dollar, and its traditional correlation with crude oil prices seems to be weakening. Traders are anticipating key economic indicators, including the Bank of Canada's interest rate decision on June 10th and employment data from both Canada and the U.S. on June 5th, which are expected to influence market sentiment for the summer. Charles St-Arnaud suggests that regardless of recession status, Canada's economy is performing poorly.