Insights 
VT 
The Canadian Dollar remains under pressure despite unexpectedly high job creation in September. The US Dollar strengthens, boosted by a more conciliatory stance from Washington towards Beijing. Even with rising oil prices, trade tensions and the prolonged US government shutdown maintain high market volatility.
Usdcad Movement And Canadian Employment
USD/CAD has increased by 0.20%, reaching its highest point since April 10, standing at 1.4034. This uptick follows strong Canadian employment figures which subdued expectations of an interest rate cut by the Bank of Canada. Statistics Canada reports the Unemployment Rate remained steady at 7.1%, surpassing the 7.2% forecast, with 60.4K jobs added.
Oil price recovery offers limited support to the Canadian Dollar. Though higher crude prices usually bolster the CAD, global demand concerns continue to limit gains. The US Dollar stabilises after President Trump suggested improved trade relations with China. The Dollar Index (DXY) rose above 99.00 following a previous decline.
The outlook remains uncertain with the ongoing US government shutdown and Federal Reserve’s anticipated interest rate cuts. Market data indicates a high probability of rate cuts at upcoming Fed meetings, influencing US Treasury yields and the Dollar’s potential. The Canadian Dollar shows varied performance against other currencies, strongest against the Euro.
We remember periods like late 2019 when a strong Canadian jobs report couldn’t stop the loonie from weakening against the US dollar. Global trade headlines were the main driver back then, pushing USD/CAD higher even as fundamentals seemed mixed. This historical example is relevant today, as the market seems to be weighing global factors more heavily than domestic ones.
Recent Labor Report And Market Expectations
Unlike the surprisingly strong job creation we saw back then, Canada’s most recent labor report for September 2025 showed a loss of 15,000 jobs. This pushed our unemployment rate up to 6.2%. With WTI crude oil prices struggling to stay above $75 a barrel due to slowing global demand, the fundamental support for the Canadian dollar is much weaker now.
In 2019, the market was pricing in aggressive Fed cuts while the Bank of Canada was seen as more hesitant. Today, the roles are reversing as derivative markets are pricing in an 80% chance of a Bank of Canada rate cut by December, given that our inflation has cooled to 2.5%. Meanwhile, the Federal Reserve is expected to hold rates steady for now, as US inflation remains stickier at 3.1%.
Given this divergence, traders should consider positioning for further weakness in the Canadian dollar against the US dollar. We see value in buying USD/CAD call options with expiries in the next one to two months. This strategy allows for profiting from a potential move towards the 1.3850 level while capping downside risk if the market turns unexpectedly.
