The Canadian dollar is falling as the federal government under Prime Minister Justin Trudeau struggles with growing dysfunction and calls among MPs for the prime minister's resignation.Consumers should branch themselves for higher prices — say analysts.On Tuesday, the Canadian dollar dipped below 70 cents U.S., continuing its fall from around 76 cents in January. On Monday, Finance Minister Chrystia Freeland resigned after disagreements with Trudeau about national finances.It was reported on Monday Canada will run a $61.9 billion deficit for 2023-24 — exceeding its $40 billion deficit guardrail. Canada's national debt has doubled since Trudeau took office in 20215, with debt servicing costs now consuming around 10% of total federal government revenue.Average Canadian wages are now on par, or lower, than the poorest U.S. states Mississippi and Louisiana. Ontario's per capita GDP is on par with Alabama."It’s a myth that devaluation of the Canadian dollar broadly stimulates the economy and leads to prosperity," reports the Fraser Institute."In fact, a weaker loonie triggers higher domestic prices, which hit consumers in the wallet, and higher importing and financing costs, which hurt businesses and government." A struggling Loonie means imports to Canada are more expensive. It also means exporters can earn more money. “A persistently weaker Canadian dollar, measured in years, would likely lead to less foreign direct investment in Canada, and by extension, a longer-term erosion of Canada’s economy with less ability to invest in R&D and fixed assets,” said Dustin Reid, chief fixed-income strategist at Mackenzie Investments.
The Canadian dollar is falling as the federal government under Prime Minister Justin Trudeau struggles with growing dysfunction and calls among MPs for the prime minister's resignation.Consumers should branch themselves for higher prices — say analysts.On Tuesday, the Canadian dollar dipped below 70 cents U.S., continuing its fall from around 76 cents in January. On Monday, Finance Minister Chrystia Freeland resigned after disagreements with Trudeau about national finances.It was reported on Monday Canada will run a $61.9 billion deficit for 2023-24 — exceeding its $40 billion deficit guardrail. Canada's national debt has doubled since Trudeau took office in 20215, with debt servicing costs now consuming around 10% of total federal government revenue.Average Canadian wages are now on par, or lower, than the poorest U.S. states Mississippi and Louisiana. Ontario's per capita GDP is on par with Alabama."It’s a myth that devaluation of the Canadian dollar broadly stimulates the economy and leads to prosperity," reports the Fraser Institute."In fact, a weaker loonie triggers higher domestic prices, which hit consumers in the wallet, and higher importing and financing costs, which hurt businesses and government." A struggling Loonie means imports to Canada are more expensive. It also means exporters can earn more money. “A persistently weaker Canadian dollar, measured in years, would likely lead to less foreign direct investment in Canada, and by extension, a longer-term erosion of Canada’s economy with less ability to invest in R&D and fixed assets,” said Dustin Reid, chief fixed-income strategist at Mackenzie Investments.
