Plummeting Canadian dollar threatens to make Black Friday deals less rewarding

Heading down to Buffalo for some Black Friday deals or to see the Bills beat the San Francisco 49ers this weekend?
You could be in for a rude awakening: Your loonies won’t go nearly as far as they did this time last year. Or, for that matter, even a few months ago.
You can thank a sputtering Canadian economy, interest rate cuts by the Bank of Canada, household debt and, well, U.S. president-elect Donald J. Trump, currency exchange experts and economists say.
Just over two months ago, the loonie was worth 74.51 cents (U.S.). Earlier this week, it had plunged as low as 70.54 cents, before recovering to 71.38 Thursday afternoon.
A big driver of the drop this year, said CIBC chief economist Avery Shenfeld, has been the growing spread between interest rates in Canada and the U.S.
With interest rates higher in the U.S., investors looking for better returns park their money into U.S. investments, fuelling demand, and price, of the greenback, Shenfeld explained.
“It’s the flow of funds. People are looking for those higher yields,” said Shenfeld. “They just look more attractive.” 
The Bank of Canada’s key overnight rate has been cut four times this year, from five per cent to its current 3.75 per cent.
The U.S. Federal Reserve’s fed funds rate — the American equivalent to the Bank of Canada’s overnight rate — is currently set at a range of 4.5 to 4.75 per cent, meaning the spread between Canadian and U.S. rates is as high as a full percentage point.
A year ago, before the Fed and the Bank of Canada started cutting to stimulate their respective economies, the overnight rate was at five per cent, and the Fed Funds rate was set at a range of 5.25 to 5.5 per cent, meaning the spread was as low as a quarter of a percentage point.
The Bank of Canada raised interest rates 10 times between March 2022 and last summer in a bid to wrestle inflation down to its two per cent target. Inflation peaked at 8.1 per cent in June, 2022 as the Canadian economy opened up from COVID-related restrictions. In October, Canada’s annual rate of inflation was at two per cent, right in the middle of the Bank’s 1 to 3 per cent target range.