Canadian Dollar Weekly Recap: Strong Jobs, Safe-Haven Flows, and Rate Speculation Shift the Tone

October 16, 2025

It was a volatile week for the Canadian dollar. The big move came Friday morning when Canada reported surprisingly strong employment data for September, which helped the currency recover part of its recent losses. Still, the USD/CAD exchange rate remains under pressure from global risk sentiment, interest rate expectations, and weaker commodity prices.

A Rocky Start: U.S. Dollar Strength, Weak Oil, and Risk Aversion

The Canadian dollar began the week under strain. Oil prices — which play a crucial role in Canada’s export revenue — were trending downward, eroding one of the main sources of support for the currency.

Meanwhile, across global markets, investors sought safety in the U.S. dollar, which strengthened broadly against most major currencies, including the Canadian dollar. The greenback gained ground early in the week, pushing USD/CAD above key technical levels.

By midweek, USD/CAD hovered near the 1.3950–1.4000 range, trading sideways ahead of Canada’s closely watched jobs report. Analysts also noted that USD/CAD had breached its 200-day moving average near 1.3977, a signal that often invites further upside momentum for the U.S. dollar.

The Surprise: Canada Adds Over 60,000 Jobs

Friday’s employment report changed the tone. Statistics Canada revealed that the economy added roughly 60,400 new jobs in September — far above the market consensus of about 5,000.

The stronger data triggered an immediate reaction in foreign exchange markets. The Canadian dollar strengthened, and USD/CAD dipped below 1.4000 toward 1.3980.

The robust job growth painted a picture of resilience in the Canadian economy and reduced expectations for an aggressive pace of future interest rate cuts. As FXStreet reported, the “strong Canada jobs data” gave the Canadian dollar a meaningful boost heading into the weekend.

However, one strong data point alone isn’t enough to reverse the broader downward pressures on the Canadian currency.

Monetary Policy and Rate Differentials: Continuing Headwinds

At the heart of USD/CAD movements remains the growing interest rate gap between the Bank of Canada and the U.S. Federal Reserve.

Earlier in October, the Bank of Canada reduced its policy rate by 25 basis points to 2.50%, marking its first rate cut since March.

According to Reuters, markets are now pricing about a 64 percent chance of another BoC rate cut at the October 29 meeting.

By contrast, long-term U.S. Treasury yields remain relatively high compared to their Canadian counterparts, drawing global capital toward U.S. assets and keeping upward pressure on the U.S. dollar.

Analysts have also pointed out that Canada’s trade and services data show some soft spots, increasing the likelihood of additional easing by the BoC if economic momentum slows.

Even with the strong September jobs report, the broader outlook for the Canadian dollar remains mixed. Unless the Bank of Canada adopts a more neutral tone later this month, interest rate differentials are likely to keep weighing on the currency.

Technical and Sentiment Factors

Technical signals and market sentiment offered additional insight. USD/CAD’s move above its 200-day moving average earlier this week gave the pair bullish momentum, while the Canadian dollar struggled to hold its ground.

Before Friday’s jobs data, the pair traded in a tight range, with neither buyers nor sellers willing to take large positions.

On the economic front, Canada’s Ivey PMI climbed to a 15-month high in September, suggesting renewed business activity. That, along with Friday’s labor data, provided some optimism about the domestic economy.

Still, broader market risk aversion and ongoing demand for safe-haven U.S. dollars limited how far the Canadian dollar could rise.

Bottom Line

The Canadian dollar faced a challenging week overall, but Friday’s strong jobs report offered a welcome recovery. Still, the underlying forces — rate differentials, weak oil prices, and risk aversion — continue to favor the U.S. dollar in the short term.

The USD/CAD’s retreat below 1.4000 is an encouraging sign for the Canadian dollar, but sustaining that momentum will depend on the upcoming Bank of Canada meeting, global economic trends, and whether oil prices can find a stronger footing.