Insights 
VT 
Canada’s PMI Rates Showing Expansion
The Canadian Dollar is influenced by factors like BoC interest rates, oil prices, economic health, inflation, and trade balance. Oil price changes directly impact CAD, as it is Canada’s largest export. Macroeconomic data such as GDP and employment indicators significantly influence the CAD’s trajectory. Higher interest rates generally bolster the Canadian Dollar, attracting foreign capital inflows.
We see the USD/CAD pair trading near its six-month high of 1.4140, but the underlying support for the US dollar appears to be weakening. The main factors are the prolonged US government shutdown and increasing expectations for a Federal Reserve rate cut in December. This situation presents a potential turning point for the currency pair in the coming weeks.
The pressure on the US dollar is mounting significantly after the recent Challenger Job Cuts report. The report, which showed over 153,000 announced job cuts in October 2025, was the highest for that month since the post-dot-com bust period of 2002. As a result, futures markets are now pricing in an over 70% probability of a 25-basis-point cut by the Federal Reserve at its next meeting.
US Government Shutdown Impacting Data Release
The record-long US government shutdown is creating major economic uncertainty and is preventing the release of crucial data like the Nonfarm Payrolls report. When we look back at the 35-day shutdown in 2018-2019, we recall the economic drag it created, and this current impasse has now surpassed that record. Traders are flying blind without official data, making the US dollar vulnerable to negative sentiment.
On the Canadian side, the picture is mixed, which might temper a dramatic fall in the USD/CAD pair. The latest seasonally-adjusted PMI has slipped to 52.4, and while still expansionary, it signals a loss of momentum similar to what we saw in late 2022 before a period of slower growth. Furthermore, WTI crude oil prices have recently been volatile, dipping below $80 a barrel on global growth fears, which could act as a headwind for the Canadian dollar.
Given this backdrop, traders should consider positioning for a potential downturn in USD/CAD from its current elevated levels. Buying put options on USD/CAD could be a prudent strategy, as it offers a way to profit from a decline while capping potential losses if the US dollar unexpectedly rallies. For those with a higher risk tolerance, initiating short positions in USD/CAD futures with a stop-loss just above the recent 1.4140 high could be an effective approach to capitalize on a reversal.
