The Canadian dollar (CAD), often referred to as the "loonie," recently experienced a notable rally, primarily driven by a robust jobs report indicating an addition of 60,400 jobs in September, far surpassing initial forecasts of just 5,000. This positive employment data buoyed sentiment around the CAD; however, analysts caution that its trajectory for the week may be swayed by fluctuations in oil prices, a key driver given Canada's status as a leading oil exporter.
Current market dynamics show the CAD struggling against the U.S. dollar, trading at 0.7144, approximately 1.3% below its three-month average of 0.7236. The loonie has demonstrated stability within a narrow range between 0.7132 to 0.7354. The broader economic backdrop includes significant challenges, notably from interest rate differentials and trade uncertainties. Following a 25 basis point cut in the key policy rate by the Bank of Canada on January 29, 2025, the interest margin between Canada and the U.S. has widened, prompting some investors to favor higher yielding U.S. assets, thus applying downward pressure on the CAD.
Trade policy remains a concern, as highlighted by a widening trade deficit that reached C$6.32 billion in August 2025. Analysts note that stagnation in export growth, coupled with rising imports, adds uncertainty to the loonie's performance in the near term. While possible agreements between Canadian and U.S. leadership seem promising, they have yet to bring tangible outcomes which may further affect investor confidence.
Oil prices have also tilted in favor of a weaker CAD, with recent volatility indicating a correlation with CAD performance. As of October 9, 2025, oil prices fell by 1.8% to $61.43 per barrel, leading to the CAD hitting a near six-month low against the U.S. dollar. The current oil price of $63.34 is notably 6.1% below its three-month average, reflecting a significant trading range volatility between $62.66 and $73.37. As oil prices continue to fluctuate, they directly impact Canadian economic revenues and the CAD's strength.
Moving forward, market observers will closely monitor upcoming economic indicators, including the next employment report, which could provide further clarity on the loonie's direction. As it stands, the future of the CAD hinges on a mix of domestic economic data, global oil markets, and the ongoing geopolitical landscape.
