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The Canadian dollar is stuck in neutral this week, unable to shake off its slump even as a few fundamentals have turned in its favor. The USD/CAD pair is holding steady around 1.4045, hovering near six-month highs as traders wait for something new to drive momentum. The markets seem to be anticipating more Canadian dollar weakness u2014 and continue to shrug off every piece of positive Canadian economic news. Stronger-than-expected Canadian job growth, firmer oil prices, and dovish talk from the U.S. Federal Reserve should have given the Loonie a lift, but so far, investors arenu2019t biting.
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Canadian Dollar Struggles for Direction as USD/CAD Holds Above 1.40 Interchange Financial • October 24, 2025 The Canadian dollar is stuck in neutral this week, unable to shake off its slump even as a few fundamentals have turned in its favor. The USD/CAD pair is holding steady around 1.4045, hovering near six-month highs as traders wait for something new to drive momentum. The markets seem to be anticipating more Canadian dollar weakness — and continue to shrug off every piece of positive Canadian economic news. Stronger- than-expected Canadian job growth, firmer oil prices, and dovish talk from the U.S. Federal Reserve should have given the Loonie a lift, but so far, investors aren’t biting. Policy divergence keeps the Loonie on its back foot The biggest factor working against the Canadian dollar right now is the widening monetary policy gap between the Bank of Canada (BoC) and the Federal Reserve. Markets expect the BoC to trim rates by roughly 33 basis points over the next year — essentially one cut with a slim chance of a second. The Fed, on the other hand, is projected to slash rates by over 100 basis points across four potential cuts, with traders even pricing in a 50/50 shot at a fifth. Normally, the expectation of faster U.S. easing would weaken the greenback, but that hasn’t been the case. The USD remains well-bid, with investors treating it as the safer bet amid mixed global data and political uncertainty. Even dovish remarks this week from Fed officials — Miran, who said the central bank may be “adjusting too slowly,” and Waller, who backed continued quarter-point cuts — weren’t enough to pull USD/CAD lower. At the moment, markets see a 99.8% chance of a Fed cut at the October 29 meeting compared to just 52% odds for the BoC. That imbalance continues to anchor the pair near the top of its recent range. Economic calendar: plenty of data, limited conviction Traders will have no shortage of data to digest this week. On Thursday, look for the Eurozone trade balance, U.S. PPI and retail sales, weekly jobless claims, Philly Fed manufacturing index, Canadian housing starts, plus a speech from BoC Governor Tiff Macklem. Friday brings another round of key releases: Eurozone inflation, U.S. building permits and housing starts, non-farm payrolls, unemployment rate, industrial production, and factory orders. However, some of the U.S. numbers could be delayed due to the ongoing government shutdown, which has added another layer of uncertainty to markets. The backdrop: oil, jobs, and sentiment Canada’s job market has been surprisingly resilient. The latest report showed an addition of about 60,000 jobs, a strong beat that briefly pushed the Loonie higher. Yet, as Reuters noted, the move quickly faded, with traders focusing instead on global growth concerns and the Fed’s policy path. Oil — one of Canada’s most important exports — has rebounded modestly after India announced a pause in Russian energy imports, but the bounce hasn’t translated into real strength for the CAD. Meanwhile, the ongoing government shutdown in Washington and lack of progress on trade discussions with China have kept risk appetite subdued. Technically, USD/CAD looks overbought, but the pair continues to find support around 1.4020, with resistance sitting near 1.4080. As some analysts point out, momentum indicators — which measure how quickly prices are moving — suggest the pair may be due for a pause before its next move. Outlook: overvalued, but still resilient From a valuation perspective, USD/CAD feels stretched, and some traders believe the market is pricing in too much pessimism for the Canadian dollar. Still, as long as the Loonie fails to capitalize on good news, the path of least resistance remains more weakness for the Canadian dollar. If Canadian data softens or oil prices retreat, USD/CAD could break above 1.41. On the flip side, any surprise strength in domestic housing or jobs data could bring it back toward the 1.39 handle. For now, the Canadian dollar remains a story of missed opportunities — and until it proves it can convert good fundamentals into actual gains, the market will keep rewarding the U.S. dollar instead. The Canadian dollar is currently trading at 1.40463 CAD against the US Dollar.
