Canadian Dollar Weakens as US Dollar Hits Six-Month High Amid Trade Optimism

The Canadian Dollar (CAD) slipped on Monday as the US Dollar (USD) surged to a six-month high, lifted by renewed trade optimism and improved market sentiment toward China.

At the time of writing, the USD/CAD pair traded near 1.4034, up 0.20% for the day—its highest level since April 10. The move came even after Canada reported stronger-than-expected September employment data, easing expectations of an immediate rate cut by the Bank of Canada (BoC).

Canada’s Job Market Shows Unexpected Strength

According to Statistics Canada, the unemployment rate in September stayed steady at 7.1%, beating the 7.2% forecast. The economy also added 60,400 new jobs, far above the projected 5,000 and sharply reversing August’s 65,500 job losses.

Most of the gains came from full-time employment, showing that the Canadian labor market remains resilient despite global uncertainty. Analysts at Commerzbank said the data make another BoC rate cut in October less likely, though they warned that recent job figures have been highly volatile.

Oil Prices Rebound, But CAD Support Remains Weak

While crude oil prices have rebounded, the Canadian Dollar continues to face pressure. As the largest oil exporter to the United States, Canada typically benefits when oil prices rise. However, concerns about slowing global demand and trade uncertainty are limiting the currency’s upward momentum.

Analysts note that unless oil prices sustain their recovery, the CAD may struggle to regain strength in the near term.

US Dollar Gains on Softer Trade Tone

On the US front, the US Dollar Index (DXY) rebounded above 99.00 after President Donald Trump struck a more optimistic tone on trade with China, saying relations “will all be fine.” His comments followed the recent announcement of 100% tariffs on Chinese imports set to begin on November 1, sparking hopes of a potential de-escalation.

The improved sentiment helped the USD recover from last week’s sharp losses. However, uncertainty still lingers due to the ongoing US government shutdown, now in its third week.

USD/CAD analysis: Dollar gains vs Canadian Dollar under pressure — trade optimism in focus.

Fed Rate Cuts Still in Focus

Despite the USD’s strength, traders continue to expect further Federal Reserve (Fed) easing this year. Markets currently price in a 95% chance of a rate cut in October and another in December, according to the CME FedWatch Tool.

These expectations keep US Treasury yields under pressure, which may limit the Dollar’s upside over the coming weeks.

Outlook: CAD Faces a Tough Balancing Act

In the short term, the Canadian Dollar will likely remain sensitive to movements in oil prices, US trade headlines, and interest rate expectations from both the BoC and Fed.

While Canada’s labor market offers some cushion, the widening policy gap between the two central banks could keep the USD/CAD pair elevated if risk sentiment remains fragile.

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