Canadian Dollar Rises to 2-Month Highs After Unemployment

The Canadian dollar appreciated toward 1.39 per US dollar to one month highs as a weaker US currency amplified earlier strength from evidence of a resilient Canadian economy.

ADP’s surprise drop in private payrolls helped push market odds toward a near certain Fed cut.

Meanwhile, unexpectedly strong third quarter GDP at an annualized 2.6% lifted the probability that the Bank of Canada will pause or slow its easing path.

A modest commodity tailwind from firmer crude and rising copper improved Canada’s terms of trade and reinforced the move while softer manufacturing PMIs offer a counterpoint but do not offset the broader support from weaker US policy expectations and firmer domestic activity.

The Canadian Dollar touched 1.40 against the USD, the highest since October 2025.

Over the past 4 weeks, US Dollar Canadian Dollar gained 0.2%, and in the last 12 months, it decreased 0.24%.

The Canadian dollar strengthened past 1.40 per US dollar to one-month highs as a stronger-than-expected Q3 GDP print coincided with a softer US dollar on growing odds of Fed easing.

Q3 GDP rose 0.6% quarter on quarter, annualized at 2.6%, reversing the prior quarter’s contraction driven by a smaller import bill down 2.2% and a slight rise in exports up 0.2%, a trade-led improvement that brightens the current account outlook.

Higher government capital spending up 2.9%, including an 82% jump in weapon-systems outlays, supported domestic demand even as household consumption edged down 0.1%.

The Bank of Canada’s pause with the policy rate at 2.25% preserves an interest-rate cushion that sustains carry-oriented inflows into CAD, while markets now price roughly an 80% chance of a 25 bp Fed cut in December which weakens the dollar and removes a major headwind for the loonie.

The Canadian dollar firmed below 1.41 per US dollar as growing expectations for looser US policy amid softer US macro data pushed the probability of a December 25bp Fed cut into the 80% range on CME FedWatch, weakening the US dollar and removing a major headwind for the loonie.

The Bank of Canada’s pause with the overnight rate at 2.25% and market bets that the BoC will remain cautious into December have preserved an interest rate cushion that supports carry oriented inflows into CAD. Oil has softened into the high $50s a barrel after intensive diplomacy around Ukraine raised the prospect of increased Russian flows which has capped the loonie’s advance, but so far the dollar move has dominated.

Traders now await Q3 GDP and the current account prints for clearer clues on the BoC’s policy path.

The Canadian dollar weakened toward 1.41 per US dollar after a brief relief rally from the seven-month low of 1.412 on November 6th, but the budget-driven lift quickly faded as underlying fundamentals remained weak.

BoC officials urged an economy-wide push to lift productivity as trade headwinds from the United States add to downside risk, as the economy shows cracks.

At the same time, October headline inflation eased to 2.2% year on year, undercutting the case for a persistently tighter Bank of Canada.

The commodity channel has also failed to provide a sustained bid for the loonie as oil lost ground after industry data showed a roughly 4.4 million barrel US crude build and seaborne inventories climbed toward record volumes, removing an important external support for the loonie.

Elsewhere, Fed minutes revealed a split among policymakers that reduced near term cut odds and the delayed US jobs release surprised to the upside with a 119,000 payroll print.

The Canadian dollar traded above 1.40 per USD, as the relief spike after Parliament approved the budget eased, but that one-off bid quickly faded because the deeper drivers for the loonie did not change.

October inflation cooled to 2.2% which weakens the case for a persistently tighter Bank of Canada and limits Canada’s carry advantage now that the policy rate sits at 2.25%.

Domestic activity also looks soft, with housing starts plunging about 17% in October, so there is little evidence of the growth pickup that would lift Canadian yields relative to the United States.

The commodity channel has been unreliable as oil swung around on inventory prints and profit taking, removing a steady external bid for the currency.

Elsewhere, shifts in Fed cut odds and episodes of firmer US rates have allowed the dollar to reclaim ground when yields move against Canada, so the relief-driven rally lacked the follow through needed to sustain a stronger CAD.