The Canadian Dollar is facing challenges despite a surprising increase in job creation in September. The US Dollar is gaining strength, helped by a friendlier approach from Washington towards Beijing. High oil prices are not providing enough support, as ongoing trade tensions and a prolonged US government shutdown create market volatility.

USD/CAD Movement and Canadian Employment

The USD/CAD pair has risen by 0.20%, reaching 1.4034, its highest level since April 10. This rise follows strong job reports from Canada, reducing expectations for an interest rate cut from the Bank of Canada. According to Statistics Canada, the unemployment rate held steady at 7.1%, better than the predicted 7.2%, with 60,400 new jobs created. Although oil prices are recovering, they offer limited help to the Canadian Dollar. While higher crude prices typically support the CAD, worries about global demand hinder gains. The US Dollar is stabilizing after President Trump indicated better trade relations with China. The Dollar Index (DXY) climbed above 99.00 after a recent dip. The outlook is uncertain due to the ongoing US government shutdown and expected interest rate cuts by the Federal Reserve. Market data suggests a high likelihood of these cuts in the upcoming Fed meetings, impacting US Treasury yields and the Dollar’s future. The Canadian Dollar’s performance varies against other currencies, showing strength especially against the Euro. We recall late 2019 when a robust Canadian jobs report couldn’t prevent the loonie from weakening against the US Dollar. Back then, global trade news was the main factor, pushing USD/CAD higher despite mixed domestic signals. This historical context is relevant now, as the market seems to prioritize global issues over local factors.

Recent Labor Report and Market Expectations

In contrast to the unexpectedly strong job growth back in 2019, Canada’s recent labor report for September 2025 showed a loss of 15,000 jobs, raising the unemployment rate to 6.2%. With WTI crude oil prices struggling to stay above $75 a barrel due to decreasing global demand, the Canadian Dollar lacks strong fundamental support. In 2019, the market anticipated aggressive rate cuts from the Fed while seeing the Bank of Canada as cautious. Today, the roles have flipped; derivative markets are now pricing in an 80% chance of a Bank of Canada rate cut by December, as our inflation has eased to 2.5%. Meanwhile, the Federal Reserve is likely to keep rates steady for now, with US inflation remaining at 3.1%. Given this situation, traders might consider preparing for further weakness in the Canadian Dollar against the US Dollar. Buying USD/CAD call options with expirations in the next month or two could be a good strategy. This approach allows for potential profits if the Dollar moves towards the 1.3850 level while limiting downside risks if the market shifts unexpectedly. Create your live VT Markets account and start trading now.

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