10 Cents – Canada

In 2025, Canada's currency landscape is defined by a cautious balancing act between persistent global headwinds and domestic resilience. The Canadian dollar continues to be significantly influenced by the monetary policy divergence between the Bank of Canada and the U.S. Federal Reserve. With inflation proving stickier than anticipated in key sectors like housing and services, the BoC maintained a "higher-for-longer" interest rate posture well into the year. This, coupled with sustained demand for Canadian energy and critical minerals, provided underlying support for the loonie, preventing a more dramatic depreciation against a robust U.S. dollar driven by America's own economic strength.

Domestically, the currency's value is a double-edged sword for the economy. A moderately weaker Canadian dollar has bolstered export-oriented industries, providing a tailwind for manufacturers and resource exporters in a slowing global growth environment. However, it has also exacerbated import inflation, keeping consumer prices elevated and squeezing household purchasing power. This dynamic has complicated the Bank of Canada's path to its 2% inflation target and contributed to a continued cost-of-living crisis that dominates political discourse.

Looking forward, the primary risks to the currency are external. The loonie remains vulnerable to sudden shifts in global risk sentiment, commodity price volatility—particularly in oil and natural gas—and the pace of economic softening in major trading partners like China and the United States. While a gradual easing cycle by the BoC is anticipated late in the year, its timing and scale are carefully calibrated against Fed actions to avoid triggering a destabilizing currency plunge. Ultimately, the Canadian dollar in 2025 reflects an economy navigating a post-pandemic normalization that is proving more protracted and complex than initially hoped.