Loonie slips to 4-year low of 71 cents, and could go lower: chief market strategist

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The Canadian dollar has weakened to its lowest position against the U.S. dollar in over four years, and one market strategist says it could go further.

Ali Jiwani, BNN BloombergKarl Schamotta, chief market strategist with Corpay talks about the impact of Canada-U.S. trade tensions on the loonie.

In an interview with BNN Bloomberg Wednesday, Karl Schamotta, chief market strategist at Corpay, says the biggest factor driving the decline in the Canadian dollar is whether the Bank of Canada is likely to cut its benchmark interest rate by more than the U.S. Federal Reserve. “The U.S. economy is being run at a high pressure level, fiscal stimulus is still pouring in, the economy is running very, very warm,” Schamotta said. “That’s sort of weighing against any prospect of easing from the Federal Reserve.”

Schamotta says Canada’s economy is underperforming the U.S. due to higher consumer debt which is stifling business investment. He predicts the loonie could drop another two to three per cent before the end of the year.“I would not rule out the Canadian dollar falling briefly through the end of the year and then beginning to rally after the inauguration date next year,” says Schamotta, noting that the Canadian dollar historically does well when the U.S. economy is growing.

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