USD/CAD is holding steady at around 1.3940 as the market remains cautious due to the US government shutdown. The Labor Department’s closure means we won’t see the September Nonfarm Payrolls report, which increases uncertainty. The US government stopped operations because Congress couldn’t reach a funding agreement. The absence of the Nonfarm Payrolls report this Friday, due to the Labor Department halting most activities, adds to the economic uncertainty.

USD Weakness Continues

In September, the US ADP Employment Change report showed a drop of 32,000 jobs in the private sector. Although wages rose by 4.5% year-over-year, this was below expectations. Additionally, the revision of the August figure from a gain to a loss of 3,000 jobs worsens the outlook for the US Dollar. The Canadian Dollar could strengthen as oil prices rise, since Canada is the largest oil supplier to the US. Currently, West Texas Intermediate (WTI) oil is nearing $62.00 per barrel, amid concerns about supply. Canada’s S&P Global Manufacturing PMI fell to 47.7 in September 2025, marking eight months of decline in the manufacturing sector. This indicates ongoing challenges for the Canadian economy, which is struggling with persistent contractions. As of October 2, 2025, we’re facing significant uncertainty due to the US government shutdown that started yesterday. Important economic data, such as the Nonfarm Payrolls report, will not be released, creating a gap in market information. This could lead to more volatility in pairs like USD/CAD as traders respond to news rather than concrete data.

Oil Prices and the Canadian Dollar

The US Dollar is expected to face downward pressure in the short term. Reflecting on the 2018-2019 shutdown that lasted 35 days, we saw the Dollar Index (DXY) weaken initially. The recent ADP report, which showed a job decline of 32,000, indicates that the US economy may not be as strong this time. The Conference Board Consumer Confidence index also fell to 101.5 in September, suggesting weakness even before this political deadlock. Higher oil prices may support the Canadian Dollar, as Canada is a significant oil exporter. With WTI crude trading around $62 a barrel—up from an average of $58 last month—the OPEC+ meeting this weekend is crucial. Any unexpected production cuts could boost the CAD, while increases might harm it. However, the Canadian economy is also showing signs of strain, which could limit gains for the loonie. The September S&P Global Manufacturing PMI slipped for the eighth consecutive month to 47.7, indicating ongoing contraction in this sector. This weak data aligns with the Bank of Canada’s cautious approach, making another interest rate hike less likely for now. With these mixed signals, we anticipate higher implied volatility in the coming weeks. This environment is suitable for options strategies that can take advantage of significant price swings, rather than simply betting on the direction of USD/CAD. Traders who expect the US Dollar to weaken may consider using options to manage their risk in case the shutdown resolves quickly. The length of the US government shutdown will be crucial in the upcoming weeks. The Congressional Budget Office previously estimated that a five-week shutdown in early 2019 lowered real GDP by 0.2% in that quarter. A prolonged shutdown lasting more than two weeks could severely impact Q4 2025 growth forecasts and weaken the US dollar further. Create your live VT Markets account and start trading now.

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