The Canadian dollar (CAD), commonly known as the "loonie," is showing mixed signals as recent developments highlight conflicting influences on its performance. Following remarks from Bank of Canada (BoC) Senior Deputy Governor Carolyn Rogers, which advocated for greater competition in the banking sector, the CAD experienced a slight uptick. This support came just before the crucial release of Canada’s September jobs report, which may determine the currency's immediate trajectory.
Anticipated U.S. Federal Reserve interest rate cuts could weaken the U.S. dollar, prompting forecasts suggesting a potential 2.8% appreciation of the CAD within the next three months. However, this optimism is tempered by recent challenges. The CAD is facing pressure due to a 4.5-month low against the U.S. dollar, largely attributed to a drop in oil prices, which slid 2.1% to $60.48 per barrel amid concerns of oversupply as OPEC+ meetings loom. Experts emphasize that as a commodity-linked currency, the CAD's value correlates directly with oil prices, creating a delicate balance for traders.
Economic indicators are not favorable either; the S&P Global Canada Manufacturing PMI fell to 47.7 in September, heightening expectations for another BoC rate cut. Additionally, growing anxiety surrounding the renegotiation of the U.S.-Mexico-Canada Agreement (USMCA) could further complicate the CAD's outlook.
In recent price developments, the CAD is trading at 90-day lows against the USD near 0.7132, which is 1.5% below its 3-month average. The currency has shown stability within a narrow range of 3.1%. On the contrary, CAD to EUR is at 14-day highs near 0.6167, closely aligned with its 3-month average, while the CAD to JPY is performing better too, at 1.9% above its average. The CAD to GBP is also at 7-day highs, reflecting some resilience against the backdrop of broader concerns.
As oil prices remain volatile—currently trading at 65.22 USD, which is 3.7% below its 3-month average—the outlook for the CAD remains uncertain. Market participants will be closely monitoring the labor market data expected today and any shift in global risk sentiment that could impact this commodity-linked currency. Overall, the future movement of the CAD will largely depend on developments in oil prices, U.S. monetary policy, and key economic indicators domestically.
