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Canadian Dollar Dips as Weak PMI and Declining Oil Prices Weigh, USD/CAD Approaches 1.3950 on Greenback’s Rebound

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  • October 1, 2025
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Canadian Dollar weakened on Wednesday with diminished factory activity and dropping oil prices weighing on the Loonie, pushing USD/CAD towards 1.3950. The Greenback rebounded from initial losses despite weaker US PMI and labor data, boosted in part by the US Supreme Court decision to halt President Trump’s bid to oust Fed Governor Lisa Cook. Canada’s manufacturing PMI indicated an eighth consecutive month of decline, while a surprise build in US crude stocks pulled WTI prices to multi-week lows, providing additional negativity for the CAD. KEY LOOKOUTS • USD/CAD inches up near 1.3950 as the US Dollar recovers from an early loss on weak US data. • US Supreme Court halts Trump’s attempt to oust Fed Governor Lisa Cook, boosting the Greenback. • Canadian manufacturing PMI shrinks for the eighth consecutive month, reflecting weakness in factory activity. • WTI crude falls to $61.50 per barrel following an unexpected build in US crude reserves, pressuring the oil-correlated Loonie. The Canadian Dollar fell against the US Dollar on Wednesday, with USD/CAD rising around 1.3950 as the Greenback strengthened even with weaker US labor and PMI figures. The USD rebound was partially underpinned by the US Supreme Court’s move to prevent President Trump from removing Fed Governor Lisa Cook, stabilizing sentiment. In Canada, its manufacturing industry remained weak, with PMI numbers suggesting a further contraction, and lower oil prices, underpinned by a surprise build-up in US crude inventories, further weighed on the commodity-linked Loonie. Canadian Dollar declined following weak factory data and lower oil prices, pushing USD/CAD to around 1.3950. US Dollar recovered despite weak data as the Supreme Court blocked Trump’s attempt to oust Fed Governor Lisa Cook. • USD/CAD is trading higher around 1.3950 as the US Dollar recovers from previous losses. • US Supreme Court prevents President Trump from trying to oust Fed Governor Lisa Cook, backing the Greenback. • ADP report indicates US private-sector jobs declined by 32,000 in September, a sharp downside shock. • US PMI reports indicate slower factory action, with ISM remaining in contraction territory. • Canadian manufacturing PMI declined to 47.7, the eighth consecutive month of contraction. • Sluggish factory production, falling new orders, and muted business sentiment put pressure on the Loonie. • WTI crude falls to $61.50 following an unexpected build in US stocks, pulling the oil-related CAD down. The Canadian Dollar came under fresh pressure as economic woes continued to depress investor confidence. Canada’s manufacturing sector remained weak, as recent PMI data released highlighted an eighth consecutive month of declining output. Contraction in output, new orders, and business confidence set continuing woes for factories, with tariff-driven pressures still weighing on costs. Meanwhile, muted hiring and cuts in inventories indicated further stress in the overall economy, and some were concerned about future growth prospects. USD/CAD Daily Chart Price SOURCE: TradingView To add to Canadian troubles, a decline in oil prices struck another blow at Canada’s commodity-sensitive currency. Oil prices fell to multi-week lows following US reports of a wider-than-expected build in inventories, hurting demand sentiment. In the meanwhile, news out of the United States also held the Greenback firm as the Supreme Court halted President Trump’s attempt to oust Fed Governor Lisa Cook, adding stability to the Federal Reserve. Collectively, they left the Canadian Dollar working hard for traction against its US equivalent. TECHNICAL ANALYSIS USD/CAD remains steadfast at the 1.3950 zone, indicating that buyers are still in command even with recent bouts of volatility. A sustained break above this line would leave the way open for a test of the psychological 1.4000 level, with near-term support at 1.3880, where short-term setbacks would be expected to uncover buying interest. Momentum indicators suggest a wary bullish bias, although any backslide below 1.3850 would leave the near-term outlook in the hands of sellers. FORECAST If the US Dollar continues to benefit from political stability and safe-haven demand following the Supreme Court decision, USD/CAD may continue higher. A clean break above 1.3950 would set the stage for a move towards the important psychological level of 1.4000, and if further momentum is gathered, buyers may target 1.4050 in the short term. Further strength in US data or greater weakness in Canadian manufacturing will enhance this positive scenario. Conversely, any subsequent softness in the Greenback because of subpar US economic data releases or waning fears of the partial government shutdown would pressure USD/CAD. A pullback from 1.3880 would open the way for the 1.3850 support level, with further losses likely to take the pair down to 1.3800. A price recovery in oil or better Canadian data would also find favor with the Loonie, capping further gains in the pair.

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Currencies

Canadian Dollar Falls as GDP Decreases, Trump Tariff Threat Binds, and US Data Jumps

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  • July 31, 2025
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Canadian Dollar (CAD) continued its losing streak for a sixth straight day, falling to its lowest in over a month as a combination of home economic weakness, trade tensions, and robust U.S. data kept the currency under pressure. Canada’s GDP decreased 0.1% in May for the second consecutive month, with U.S. President Donald Trump warned Canadian goods not included in the USMCA of 35% tariffs if there is no agreement by August 1. While stronger-than-expected U.S. inflation and labor market figures further reinforced the U.S. Dollar, putting pressure on the CAD, investor sentiment towards the Canadian economy is still wary given trade tensions rising and economic momentum weakening. KEY LOOKOUTS • The markets are anxiously observing if a new trade agreement will be reached prior to Trump’s suggested tariff deadline, potentially having drastic effects on Canadian exports. • With consecutive GDP declines and increasing trade risks, additional rate cuts by the Bank of Canada are still in the picture if economic conditions worsen. • Ongoing U.S. inflation and labor data strength should continue to buoy the USD, with a potential short-term upside for the USD/CAD pair. • Canada’s foreign policy announcements, including its recent Palestinian statehood positions, may continue to put further stress on US-Canada relations and detract from CAD sentiment. The Canadian Dollar continues to struggle as a mix of soft domestic economic data, rising trade tensions with the U.S., and improved-than-anticipated American economic readings bear down on the currency. As Canada’s GDP fell for the second straight month and U.S. President Donald Trump gave warning of massive tariffs on Canadian exports if a new trade accord is not reached by August 1, investor attitudes have become increasingly risk-averse. While that was happening, firm U.S. inflation and labor data strengthened the Greenback, sending the USD/CAD pair to its highest level since late May. The Canadian Dollar is under ongoing pressure due to diminishing GDP, increasing trade tensions with the U.S., and robust American economic data. USD/CAD has rallied to a high in two months, with market attention on August 1 tariff imposition. • The Canadian Dollar has lost ground for six consecutive sessions, hitting a low since last month of May. • U.S. President Trump threatens 35% tariffs on Canadian items not included under USMCA if there is no agreement by August 1. • GDP of Canada fell 0.1% in May for the second month running. • The Bank of Canada left interest rates steady at 2.75% but indicated potential cuts in the event of an economic slowdown. • U.S. Core PCE Price Index increased 0.3% MoM in June, remaining above estimates and supporting concerns over inflation. • Initial jobless claims declined to 218K, indicating a strong labor market in the U.S. • Increasing geopolitical tension and uncertainty in trade keep weighing down investor sentiment in the Canadian Dollar. The Canadian Dollar is coming under increasing pressure as a combination of economic hardship and political uncertainty shrouds the future of Canada’s economy. The most recent GDP numbers announced a 0.1% loss in May, the second consecutive monthly drop, which indicates weakening momentum in major sectors. Meanwhile, relations with the United States have become increasingly strained. President Trump’s latest threat of deep tariffs against Canadian products beyond the USMCA has created apprehension of an impending trade war. The comments followed soon after Canada openly endorsed Palestinian statehood—a subject that has created more tension in diplomatic ties between the two countries. USD/CAD DAILY PRICE CHART SOURCE: TradingView Domestically, policymakers face a sensitive climate. The Bank of Canada left its benchmark interest rate unchanged but recognized ongoing inflation pressures and increased uncertainty related to trade. In the meantime, the United States keeps pumping out solid economic information, presenting another wrinkle for Canada’s economic planners. Consumer spending and income in the U.S. both posted gains, and unemployment claims were low, highlighting strong demand south of the border. As negotiations are ongoing and the deadline of August 1 draws closer, investors and policymakers alike are on tenterhooks, not knowing what the future holds for Canada’s trading future. TECHNICAL ANALYSIS The USD/CAD currency pair is trading at the doorstep of a critical resistance zone of 1.3830–1.3850, its highest level since May end. A break above this range in the long term would set the stage for a push towards the next resistance of 1.3900. Momentum indicators such as the Relative Strength Index (RSI) are heading towards the overbought zone, indicating some short-term consolidation or pullback potential. Overall, however, the trend remains bullish as long as the pair remains above the 1.3750–1.3780 support zone, with the buyers likely to continue dominating unless some fundamental shift takes place. FORECAST If trade tensions subside and the August 1 tariff imposition deadline slips by without imposition of fresh duties, the Canadian Dollar may recover some lost ground. Encouraging news in US-Canada trade negotiations, in conjunction with any indication of Canada’s economic statistics rebounding, can sustain a CAD rebound. Moreover, if the Bank of Canada provides a positive indication of future growth or inflation softening starts to materialize, it will be able to regain investor confidence and drive USD/CAD lower towards key levels of support. Still, if the U.S. imposes Trump’s suggested 35% tariffs, the Canadian economy might be put under further pressure, likely pushing the CAD lower. Persistent weakness in local data, especially if GDP deteriorates further or inflation accelerates unexpectedly, could heighten the chances of BoC rate cuts, again weighing on the currency. At the same time, if U.S. economic figures keep emerging strongly and risk appetite continues to remain weak, USD/CAD could post fresh highs and head towards 1.3900 or higher in the near future.

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