Page 5 – CC&L Financial Group Ltd.

Global manufacturing PMI new orders – a timely coincident indicator of industrial momentum – fell for a third month in May. The decline from a February peak is consistent with a slowdown in global six-month real narrow money momentum between June and October 2024 – see chart 1.

Chart 1

The PMI fall started slightly earlier than had been expected here. The eight-month interval between the June peak in real money momentum and the February PMI peak compares with an average lag of 11 months at prior turning points since 2015.

Monetary considerations alone would suggest that the PMI will decline further into mid-year before recovering to another local high around end-2025 – the dotted arrows in the chart show a possible path.

The US trade policy shock, however, is likely to impart a negative skew to this profile, as recent demand front-loading reverses and spending decisions remain on hold until tariff uncertainty abates.

Accordingly, the current PMI decline could extend further than indicated with only a minor H2 recovery. Weak April money numbers, moreover, suggest darkening prospects for end-2025 – see previous post.

Global (i.e. G7 plus E7) six-month real narrow money momentum – a key leading indicator in the approach followed here – fell sharply in April, to its lowest level since December. The relapse douses hope generated by a pick-up into March, which suggested a bounce-back in the global economy later in 2025, assuming no further negative “shocks”.

The April fall was driven by a slowdown in nominal money growth to its weakest since November. Six-month consumer price momentum eased slightly further to match its 2024 low (2.0% annualised) – see chart 1.

Chart 1

To recap, a fall in real narrow money momentum between June and October 2024 was expected here to be reflected in a global economic slowdown in Q2 / Q3 2025, which the US trade policy shock will amplify.

Subsequent monetary reacceleration into March held out the hope of an economic recovery in late 2025, by which time negative tariff effects could be starting to fade.

The April money growth fall, however, suggests that a negative feedback loop is developing, with reduced confidence due to US policies resulting in increased risk aversion and a tightening of monetary conditions, despite most central banks remaining on an easing path.

The April decline reflected falls across major economies, reinforcing the negative signal – chart 2.

Chart 2

Economic momentum has been supported by demand front-loading but payback is arriving.

A surge in US goods imports boosted GDP in the rest of the world by 0.25-0.5% in Q1 but April advance numbers suggest a full reversal – chart 3.

Chart 3

Inventory accumulation isn’t just a US story. Stockbuilding as a percentage of GDP rose similarly or by more in major European economies in the year to Q1 – chart 4.

Chart 4

Economic growth depends on the change in stockbuilding, so even a stabilisation at its recent pace would suggest a significant loss of output momentum.

Connor, Clark & Lunn Financial Group (“CC&L Financial Group”) announced the recent expansion of the Connor, Clark & Lunn UCITS ICAV with the addition of a global small cap equity strategy and a global equity strategy. The two strategies are sub-advised by the Quantitative Equity Team at Connor, Clark & Lunn Investment Management Ltd. (“CC&L Investment Management”).

The global small cap equity strategy and global equity strategy utilize CC&L Investment Management’s quantitative investment process. Both strategies seek to outperform their benchmarks, MSCI ACWI Small Cap Index (net) and MSCI ACWI Index (net) respectively, over a market cycle.

CC&L Investment Management is the oldest and largest affiliate of CC&L Financial Group, headquartered in Vancouver, Canada. Founded in 1982, the firm’s investment solutions include equities, fixed income and alternatives; including portable alpha, market neutral and absolute return strategies.

The Quantitative Equity Team’s (the “Q Team”) systematic investment strategies aim to add value through different market environments. The Q Team’s quantitative investment process is continuously evolving with new alpha insights and innovative technology solutions. The Q Team comprises 80 investment professionals and is co-headed by Jennifer Drake and Steven Huang. “We have been managing quantitative portfolios for over 20 years, continuously strengthening our process with the aim of delivering results for clients,” says Jennifer Drake. “We are excited to extend our platform and make more of our strategies available to European investors.”

About Connor, Clark & Lunn Investment Management Ltd.

Connor, Clark & Lunn Investment Management Ltd. (CC&L Investment Management) is one of the largest independent partner-owned investment management firms in Canada. Established over four decades ago, CC&L Investment Management offers a diverse array of investment strategies including equity, fixed income, balanced and alternative solutions including portable alpha, market neutral and absolute return strategies. CC&L Investment Management is an affiliated investment manager of Connor, Clark & Lunn Financial Group Ltd. with over US$54 billion AUM.

About Connor, Clark & Lunn Financial Group Ltd.

Connor, Clark & Lunn Financial Group Ltd. (CC&L Financial Group) is an independently owned, multi-affiliate asset management firm that provides, through its multi-affiliate structure, a broad range of traditional and alternative investment management solutions to institutional and individual investors. CC&L Financial Group brings significant scale and expertise to the delivery of non-investment management functions through the centralization of all operational and distribution functions, allowing talented investment managers, such as Connor, Clark & Lunn Investment Management Ltd., to focus on what they do best. CC&L Financial Group’s affiliates manage over US$99 billion in assets. For more information, please visit cclgroup.com.

The material is for informational purposes only and should not be regarded as a recommendation or an offer to buy or sell any product or service to which this information may relate. Certain products and services may not be available to all entities or persons.

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An investment in the fund involves risk; principal loss is possible. There is no guarantee the fund’s investment objectives will be achieved. The value of equity and fixed income securities may decline significantly over short or extended periods of time. More information on these risk considerations, as well as information on other risks to which the fund is subject, such as concentration/non-diversification and investment strategy risks, are included in the fund’s prospectus.

This release does not constitute or contain an offer, solicitation, recommendation or investment advice with respect to the purchase of the fund described herein or any security. Prospective investors should carefully consider fund objectives, risks, charges, tax considerations and expenses and other relevant information before investing. For this and more information on the Connor, Clark & Lunn UCITS ICAV, please request a prospectus and read it carefully before you invest. Prospective investors should also consult their professional advisers as to the suitability of any investment in light of their particular circumstances and applicable citizenship, residence or domicile.

Shares of any UCITS sub-advised by CC&L Investment Management are only available for certain non-US persons in select transactions outside the United States, or, in limited circumstances, otherwise in transactions which are exempt from the registration requirements of the United States Securities Act of 1933, as amended in accordance with Regulation S and such other US laws as may be applicable. This communication is not directed at any US persons which are not eligible to invest in any UCITS product sub-advised by CC&L Investment Management.

US money growth is slowing, suggesting less support for the economy and improving prospects for rate cuts.

Six-month growth of the preferred narrow and broad aggregates here fell to 6.6% and 5.6% annualised respectively in April, down from recent peaks of 8.6% and 6.7% – see chart 1.

Chart 1

Chart 2 shows key influences on broad money expansion. Strength in late 2024 / early 2025 was driven by monetary deficit financing initiated by the Treasury (“Treasury QE”). The six-month running total of such financing, however, fell sharply in April, reflecting a recent reduction in the stock of Treasury bills coupled with a rebound last month in the Treasury’s cash balance at the Fed.

Chart 2

Another significant contributor to the monetary slowdown has been a decline in commercial banks’ net external assets. Changes in such assets are the counterpart of the basic balance of payments position. This position has weakened as tariff front-running has boosted the trade deficit, while negative and chaotic policies have discouraged portfolio capital inflows.

Fed QT has remained a drag on broad money growth but the six-month impact is moderating, reflecting the April taper.

The monetary slowdown has also been mitigated by a pick-up in bank loan growth.

A consideration of prospects for these influences suggests that money growth will moderate further.

As previously discussed, the Treasury’s financing plans, based on a lifting of the debt ceiling, imply a sizeable negative impact in the six months to September as issuance resumes and the Treasury’s balance at the Fed is restored to its prior level – chart 3.

Chart 3

The Fed could taper QT further to ease associated pressure on bank reserves but may not fully offset the Treasury drag.

The basic balance of payments may remain weak as foreign investors diversify away from US exposure.

The recent pick-up in bank loan growth, meanwhile, partly reflects tariff-related stockbuilding and may slow as this moderates. Acceleration was signalled by the Fed’s senior loan officer survey but corporate credit demand balances fell back in the latest (April) report.

“You are what you eat.”

The importance of gut health has been gaining a lot of attention in the last couple of years. There has been research highlighting the importance of gut health and how it contributes to the better overall health of an individual. More research is emerging, but many experts believe that we are still at the tip of the iceberg in terms of understanding the incredible role that the gut has to play in our bodies.

The gut is responsible for breaking down the food that we eat and absorbing nutrients. The trillions of microorganisms that live inside the gut are meant to help boost the immune system, help with weight management and stabilize the body’s blood sugar levels, among many other functions. These microorganisms are impacted by the foods we ingest; eating nourishing whole foods rather than processed foods can promote greater colonization and multiplication of the gut bacteria, improving overall health. Numerous studies have shown that ultra-processed foods – typically high in fat, sugar and additives like emulsifiers – can alter the gut microbiome and trigger chronic inflammation. Since the discovery of the gut microbiota’s role in health, research on how diet affects it has grown significantly.

Ultra-processed foods are industrially manufactured, highly palatable and convenient, but they often have poor nutritional value. Their consumption is especially high in high-income countries where they contribute a substantial portion of daily energy intake. As incomes rise, dietary patterns shift toward these types of foods, leading to increased rates of non-communicable diseases such as obesity, type 2 diabetes and cardiovascular conditions. This rise in disease burden in wealthier nations is closely linked to both changes in diet and lifestyle, including more sedentary behaviour and urbanization.

Given the negative impact of ultra-processed foods on gut health and their association with chronic diseases in high-income countries, there is growing interest in strategies to support and restore a healthy gut microbiome. One such approach is the use of probiotics which are live microorganisms that help increase the diversity of the gut microbiome and enhance overall gut health. With rising consumer awareness of gut health’s importance, probiotics have gained popularity as a vital component of dietary supplements and functional foods. Beyond gut health, probiotics contribute to a stronger immune system.

A significant portion of the body’s immune cells lives in the gastrointestinal tract, and a healthy microbiome is essential for optimal immune function. Probiotics can enhance immune response, reduce the incidence of respiratory infections and may even help manage allergic conditions. Furthermore, emerging research suggests potential mental health benefits linked to the gut-brain axis, indicating that probiotics might help alleviate anxiety and depression symptoms. Among the companies leading this movement, BioGaia stands out due to its strong scientific foundation, innovative products and dominant market presence.

BioGaia

BioGaia AB (BIOGB SS), a Swedish biotechnology company, has positioned itself as a global leader in probiotic development, specifically in the medical-grade and pediatric segments. With over 30 years of research, BioGaia focuses on developing probiotic products based on robust scientific research. Their flagship strain, L. reuteri DSM 17938, is backed by numerous clinical studies demonstrating its effectiveness in treating infant colic, reducing diarrhea in children and improving oral health.

One of BioGaia’s key strengths is its commitment to science and partnerships with academic institutions and healthcare professionals. Unlike many supplement companies that rely on generalized claims, BioGaia ensures its probiotics are clinically tested and validated for specific health conditions. This evidence-based approach has earned the company credibility and trust among pediatricians, dentists and gastroenterologists worldwide.

Additionally, BioGaia has achieved a strong market presence through strategic global distribution. Its products are available in over 100 countries, either under the BioGaia brand or through licensing partnerships with pharmaceutical companies. This extensive reach, combined with a focus on high-quality, well-researched products, has helped BioGaia capture significant market share in the growing probiotics industry.

UK April inflation numbers were much less bad than reported.

Annual headline and core CPI inflation rose by 0.9 pp and 0.4 pp respectively from March, to 3.5% and 3.8%. These increases, however, were entirely attributable to hikes in government-controlled prices and vehicle excise duty (VED).

Water and sewerage charges rose by 26% in April versus 8% a year earlier, boosting annual headline and core rates by 0.18 pp and 0.23 pp respectively.

“Other services for personal transport equipment” – a category dominated by VED – rose by 19% versus 4% a year ago, adding 0.22 pp and 0.28 pp to headline and core rates.

The household energy price cap was raised by 4.7% versus a 12.4% fall in April 2024, boosting the headline rate by 0.65 pp.

Summing the above, official actions added 1.05 pp to the headline rate and 0.51 pp to core – more than the actual March-April increases.

Accordingly, the adjusted core rate calculated here fell from 3.2% in March to 3.1%, equalling its recent low (in December and September 2024) – see chart 1.

Chart 1

This measure, moreover, takes no account of Easter timing effects, which may have further inflated the April outturn. For example, air fares rose by 27% last month versus 7% in April 2024, implying a 0.13 bp lift to annual core.

Underlying softening is consistent with lagged money trends and sterling appreciation – the effective rate is currently 3% above its 2024 average level and 7% higher than in 2023.

The MPC is concerned that another inflation pick-up, although unrelated to monetary policy, will generate “second-round” effects. Still-subdued money growth, currency strength and a weakening labour market argue for a relaxed view.

CALGARY, AB, May 23, 2025 – Oakcreek Golf & Turf LP (“Oakcreek”), a leading distributor of Toro commercial turf equipment, today announced the acquisition of L.L. Johnson Distributing Company, Inc. (“LL Johnson”) and Midwest Turf & Irrigation (“Midwest Turf”), which together represent substantially all of the assets of Pattlen Enterprises, Inc. Terms of the transaction were not disclosed.

For 50 years, LL Johnson in Denver, Colorado and Midwest Turf in Omaha, Nebraska, have been recognized as leading distributors of commercial turf maintenance and irrigation equipment, systems and parts to customers located across the US Rockies and Midwest. They are distributors of Toro equipment, along with a broad selection of equipment and solutions from other leading manufacturers. These products serve a variety of end markets including golf courses, sports complexes and stadiums, municipalities and other commercial and residential uses.

“We are excited to welcome LL Johnson and Midwest Turf into the Oakcreek family,” said Patrick Nolan, CEO of Oakcreek Golf & Turf LP. “Their industry knowledge, customer relationships, and talented team are a perfect fit with our long-term vision of becoming a best-in-class distributor to our OEM partners. Together, we look forward to delivering even greater value to our customers.”

“I’m very pleased to see our business, built over many decades by an exceptional team, being acquired by Oakcreek,” Jim Johnson, CEO of Pattlen Enterprises, Inc. said. “Oakcreek’s customer-first mentality aligns perfectly with our own. I’m confident that this partnership will lead to continued success for the decades ahead.”

Simon Gélinas, Managing Director at Banyan Capital Partners, said, “Jim has built a wonderful business in LL Johnson and Midwest Turf and we are privileged to support the next phase of its journey. Banyan is committed to building industry leaders and we believe this is an ideal fit.”

LL Johnson and Midwest Turf will continue to operate under their existing names, ensuring a smooth transition for employees, customers and partners. The integration process is expected to be completed over the coming months, with a focus on maintaining continuity and strengthening our collective offering.

About Pattlen Enterprises, Inc.

Pattlen Enterprises, Inc. is a full-service distributor of Toro commercial equipment, comprising two entities: LL Johnson in Denver, Colorado and Midwest Turf in Omaha, Nebraska.

Denver-based LL Johnson (formerly named Barteldes Seed Company) was founded by Leonard and Patt Johnson in 1976. Soon after, Omaha-based Midwest Turf & Irrigation (formerly Midwest Toro) was added in the fall of 1980. These two distributorships then combined under the corporate name of Pattlen Enterprises. In 2005, Leonard’s son James purchased the company.

About Oakcreek Golf & Turf LP

Oakcreek Golf & Turf LP is Western Canada’s full-service distributor of Toro Commercial Turf Care Equipment, Toro Golf Irrigation Equipment, Yamaha Golf Cars and Kässbohrer (PistenBully) snow grooming equipment. Oakcreek’s head office is in Calgary, Alberta and has facilities across Western Canada. In 2017, Oakcreek expanded its coverage into the southwestern United States with the acquisition of Simpson Norton Corporation, based in Phoenix, Arizona. Oakcreek is owned by Banyan Capital Partners, a Canadian private equity firm, and its senior management team. www.oakcreekgolf.com

About Banyan Capital Partners

Founded in 1998 and under current management since 2008, Banyan Capital Partners is a Canadian-based private equity firm that makes equity investments in middle-market businesses throughout North America. Through a long-term investment approach, Banyan has developed into one of Canada’s leading middle-market private equity firms with an established track record of success in providing full or partial liquidity to founders, families and entrepreneurs and helping them take their business to the next level. For more information, please visit banyancapitalpartners.com.

Banyan is part of Connor, Clark & Lunn Financial Group Ltd., an independent, employee-owned, multi-boutique asset management firm with over 40 years of history and offices across Canada and in the US, the UK and India. Collectively managing over CAD142 billion in assets, CC&L Financial Group and its affiliate firms offer a diverse range of traditional and alternative investment products and solutions to institutional, high-net-worth and retail clients. For more information, please visit cclgroup.com.

Media Contact

Banyan Capital Partners
Simon Gélinas
Managing Director
Banyan Capital Partners
(416) 291-0029
[email protected]

One of the joys of investing in the world of small caps is discovering a company that has carved out a niche in the most unexpected of markets. Most of these companies go unnoticed as part of a larger value chain, their products often hidden from the eyes of the end consumer. The idea of a “hidden champion” toiling away in deliberate obscurity while quietly dominating a niche sector or technology was first highlighted by renowned management consultant Hermann Simon in his book – “Hidden Champions of the Twenty First Century.”

What is a hidden champion, one might ask? According to Simon, hidden champions have the following three attributes:

They are in the top three of their chosen global niche.
They generate revenue between $5 million and $5 billion.
They maintain obscurity in terms of brand recognition (B2B in most cases).

Some of the attributes that define them are also what makes them successful. The key lessons we can take from observing hidden champions are:

Ambition: Despite their size, they set extremely ambitious goals. It is market leadership or bust. Goals are invariably long-term focused with decades in mind.
Specialization: Their preference is both extreme focus and depth of focus. They identify narrow markets and specialize in them.
Globalization: Their specialization is then unleashed on global markets. They aggressively hunt for new markets and prefer to serve those markets with their own subsidiaries instead of getting tied up with third parties.
Innovation: Scarcity of resources due to their small size means they need to be much more effective with R&D. Thinking outside the box means you need to innovate not just products, but processes as well.
Customer closeness: Large customers can be demanding and often want the lowest price. Hidden champions respond by engaging closely with customers. Providing advice and system integration services by closely engaging with customers creates stickiness and deep moats.
Financing: Most hidden champions are self-financed with ownership that is long-term oriented and conservative with capital allocation.
Culture: Culture is high performance with more work to go around than headcount. Turnover is low and managers tend to have long tenures.

Hidden champions tend to be everywhere in the world of small caps, including in emerging markets. In our emerging market small cap portfolio, we have a good representation of hidden champions serving a diversity of end markets. Take Hongfa Technology Co. Ltd. (600885 CH), a Chinese company which has carved out a niche in power relays and is the global leader with over 20% market share. Power relays are a crucial component of any electric equipment that is a part of modern life. They convert a low power input into a high power outcome. From home appliances to industrial equipment, alarms and automobiles, its relays form a ubiquitous part of our lives. As the world upgrades its power grids and AI drives higher power consumption, Hongfa’s high-voltage products should see enhanced demand in the coming years.

Similarly, we own a company in Korea called Vitzrocell Co. Ltd. (082920 KS) which is among the top three players globally in manufacturing primary batteries. Primary batteries have high energy densities, a low discharge rate (allowing them to run for 10 years and beyond) and a wide operational temperature range (-55°C–+85°C). This makes them ideal for use in harsh conditions that require extremely high reliability like oil and gas equipment, rockets and utility meters.

Finally, over in India, we own Suprajit Engineering Ltd. (SEL IN), which is the second largest global manufacturer of control cables and third largest manufacturer of halogen lamps. Suprajit makes over 15,000 types of control cables used in passenger vehicles, two- and three-wheelers and off-highway vehicles like tractors and recreational vehicles. Control cables, as the name suggests, transmit control signals to control equipment versus power cables that transmit high voltage power.

Suprajit is the textbook example of a hidden champion with their stated goal of being a leader in control cables, growing a global manufacturing footprint, deep relationships with leading OEMs and nimble, low-cost R&D efforts leveraging talent in India. With most of global manufacturing now located in emerging markets, we see a landscape littered with hidden champions waiting to be uncovered.

Fixed income investments are versatile, addressing a range of investor goals. Defined benefit pension plans use fixed income as an interest rate hedging tool, typically through longer duration securities, to match liability risk. For investors like endowments, foundations and First Nation trusts, who focus on generating absolute returns across different market environments, stable returns is generally the primary objective.

This article summarizes some of the discussion at a recent Strategic Exchange webinar on the outlook for fixed income and the range of strategies available to investors to manage the challenges in the current economic environment.

Broad range of strategies

Traditional fixed income assets, like government and corporate bonds, have long been core holdings for investors. Today, non-traditional fixed income investments are added to enhance core bond holdings (Figure 1).

Figure 1 – Range of fixed income strategies

Traditional fixed income		Non-traditional fixed income
Government	Universe	High yield	Private loans
Provincial	Long	Mortgages	Absolute return
Corporate	Strip bonds	Emerging market credit

Bond yields generally indicate expected longer-term return. Yields have declined from the higher levels in 2024, suggesting there will be continued interest in non-traditional fixed income strategies to complement traditional strategies to enhance returns.

Tariffs, the economy and fixed income

President Trump’s “America First” agenda introduced tariffs to protect US industries and reduce trade deficits, causing global market volatility and sparking concerns about inflation and sustained high interest rates.

There is a wide range of possible outcomes from the tariffs. Weakening growth combined with sticky inflation are ingredients for stagflation. Central banks have little or no flexibility in this scenario. In the pre-COVID world, in anticipation of weakening growth or a weakening labour market, central banks could cut interest rates. However, they do not have the same luxury today, particularly considering sticky inflation.

TJ Sutter, Head of Fixed Income at Connor Clark & Lunn Investment Management, noted the tariff situation is fluid, and the Trump administration has sometimes backpedaled on their resolve. However, the concern is a lot of the potential damage to growth and inflation outlook is already done both in the United States and Canada with business confidence being low, uncertainty high, business investment and capital expenditure intentions stalling and, in some cases, falling off a cliff.

The uncertainty lies in whether the hard economic data will match the soft data of intentions and confidence. These indicators suggest a high probability of a further slowdown. Sutter noted that for his team, the current sentiment is the introduction of the tariffs indicate a recession probability range of 40% to 60% for both Canada and the United States.

Darren Ducharme, CEO of the fixed income specialist manager Baker Gilmore & Associates, noted the sharp rise in geopolitical risk and the associated uncertainty has made navigating markets, including fixed income, much more challenging. Volatility is likely to remain high, and the rise in headline risk will continue to make forecasting expected movements in fixed income markets challenging.

Ducharme emphasized that effective risk management is essential in this volatile environment. While market volatility offers opportunities for active managers, it is vital to appropriately size risk to withstand market turbulence.

Non-traditional fixed income strategies

Incorporating non-traditional fixed income strategies alongside core fixed income holdings can cater to different investor needs and market conditions.

Non-traditional fixed income strategies offer several advantages for portfolio diversification and returns, including:

Higher yield potential: These strategies often provide higher yields than traditional fixed income investments, making them attractive in low interest-rate environments.
Diversification: Investing in assets like mortgages, emerging market credit and absolute return strategies can reduce overall portfolio risk by adding exposure to various economic cycles and credit markets.
Flexibility: Absolute return strategies allow managers to adapt to changing market conditions and seek returns across various asset classes.
Inflation protection: Some non-traditional fixed income investments, like mortgages, offer better protection against inflation compared to traditional bonds.
Enhanced risk-adjusted returns: A multi-strategy solution balances interest rate risk with credit risk, improving long-term risk-adjusted returns.

Stay alert to risk

Fixed income investments are vital for diversified portfolios, offering an alternative stream of returns. Tariffs and rising geopolitical risks have heightened market volatility, making effective risk management more crucial. Traditional fixed income assets, like government and corporate bonds, remain core holdings for investors. Non-traditional fixed income strategies, including mortgages, emerging markets credit, private loans and absolute return strategies, offer valuable opportunities to enhance returns and diversify risk.

In these challenging times, investors should carefully size risk and consider incorporating a broad range of fixed income strategies to weather market turbulence. Leveraging non-traditional fixed income investments can help portfolios achieve better risk-adjusted returns and cater to diverse investor needs. Investors should remain vigilant and adaptable, ensuring their portfolios are well-positioned to thrive in the evolving economic landscape.

President Trump introduced tariffs as part of his “America First” agenda to protect US industries and reduce trade deficits. These tariffs have led to volatility in global stock and currency markets, raising concerns about inflationary pressures and prolonged high interest rates. Additionally, there are questions about the US dollar’s role as the world’s reserve currency, which could affect its long-term stability. A weaker US dollar impacts Canadian investors’ foreign investments, depending on their currency hedging strategies.

This article reviews the longer-term relationship between the US dollar and Canadian dollar and places the recent currency volatility into perspective.

Historical perspective

Figure 1 illustrates the historical exchange rates between the Canadian dollar and the US dollar from 1970 to the end of April 2025.

Figure 1 – Canadian-US exchange rates
Source: Bank of Canada

Rise of the Canadian dollar
The Canadian dollar experienced a long period of decline until the early 2000s when it began to rise, reaching parity with the US dollar in September 2007 for the first time in over 30 years. Several factors contributed to this surge:
- Commodity boom: Canada is rich in natural resources, and the record-high prices for oil and other commodities played a significant role in strengthening the Canadian dollar.
- Strong economy: A robust global economy boosted demand for Canadian exports, further driving up the currency.
- US economic weakness: The United States was facing economic uncertainty, particularly with the subprime mortgage crisis, which weakened the US dollar relative to other currencies.
- Interest rate differentials: The Bank of Canada maintained higher interest rates compared to the US Federal Reserve, making Canadian assets more attractive to investors.

Sharp downturn
In 2008, the Canadian dollar experienced a sharp downturn due to the global financial crisis. Investors moved their money into safe-haven assets like the US dollar, and oil prices plummeted from over USD140 per barrel to below USD40, which negatively impacted the value of the Canadian dollar.The financial crisis triggered a recession in Canada, leading to the Bank of Canada cutting interest rates to stimulate the economy, making Canadian assets less attractive to investors. By early 2009, the Canadian dollar had dropped to below 80 cents USD, a steep decline from its 2007 peak.

Commodity-driven recovery
In 2009, the Canadian dollar rebounded, largely due to the recovery in commodity prices and Canada’s more stable banking system compared to other countries. The Canadian dollar regained much of its lost value and reached parity with the US dollar again in early 2011.

Short-lived recovery
After 2011, the strength of the Canadian dollar was once again affected by commodity prices, with oil prices dropping from over USD100 per barrel to below USD30 by 2016. Concerns over European debt crises and slowing global growth also led investors to favour the US dollar. By 2016, the Canadian dollar had dropped to around 71 cents USD.

Narrow trading range
Since 2016, the Canadian dollar has traded within a relatively narrow range, despite the uncertainty associated with the COVID-19 pandemic, recent high levels of inflation and the volatility caused by tariffs.

Recent perspective

Figure 2 highlights the more recent history of Canadian-US exchange rates from 2020 to the end of April 2025. The introduction of tariffs initially caused the Canadian dollar to hit a low of around 69 cents USD, but it subsequently rebounded and finished April at a little over 72 cents.

Figure 2 – Canadian-US exchange rates

Source: Bank of Canada

To date, the volatility is much less compared to past periods when the Canadian dollar reached parity with the US dollar. For the Canadian dollar to reach parity again, several things would need to happen:

Stronger Canadian economic growth compared to the United States.
Higher interest rates in Canada to attract investment.
Weaker US dollar due to inflation or economic downturns.
Increased demand for Canadian exports, especially oil and natural resources.

The current economic environment does not suggest a rapid rise in the Canadian dollar relative to the US dollar. For example, oil prices are significantly below previous peak levels, and the bigger concern today for Canada is a prolonged recession.

Conclusion

The Canadian dollar has experienced cycles of decline and recovery, influenced by commodity prices, economic conditions and interest rate differentials. Recent volatility has been impacted by President Trump’s tariffs but is much less significant compared to previous events. The current economic environment does not suggest a rapid rise in the Canadian dollar. Investors should continue to monitor the situation.