The Canadian dollar (CAD) continued to weaken against the US dollar (USD) on Wednesday, with USD/CAD climbing to its highest level since April 9. At the time of writing, the pair traded around 1.4126, marking its fifth consecutive daily gain as broad-based greenback strength kept the loonie under sustained pressure.
US Dollar extends rally on upbeat data and hawkish Fed expectations
The US dollar received fresh support following stronger-than-expected economic indicators. The ISM Services Purchasing Managers Index (PMI) rebounded to 52.4 in October from 50.0 in September, signaling a return to expansion for the eighth time in 2025. The survey highlighted solid gains in Business Activity (54.3) and New Orders (56.2) the latter reaching its highest level since October 2024.
However, the Employment Index remained in contraction for a fifth straight month at 48.2, suggesting some ongoing softness in hiring. Meanwhile, Prices Paid rose to 70.0, the highest in three years, reflecting persistent inflationary pressures.
ISM Chair Steve Miller noted that while demand showed improvement, uncertainty surrounding tariffs and the US government shutdown continued to weigh on hiring decisions and overall business confidence.
Reinforcing the dollar’s momentum, the ADP Employment Change report showed that private-sector payrolls increased by 42,000 in October, reversing September’s decline and underscoring a still-resilient labor market.
These figures have strengthened the case for the Federal Reserve (Fed) to pause further rate cuts in December. As a result, the US Dollar Index (DXY) climbed to 100.30, its highest since May 29, as traders scaled back expectations of near-term monetary easing.
CAD pressured by weak oil prices and trade tensions
The Canadian dollar’s weakness has been compounded by softer energy prices. West Texas Intermediate (WTI) crude oil — one of Canada’s key exports — traded near $60.00 per barrel, down about 0.35% on the day. The decline in oil prices has reduced support for the loonie and weighed further on sentiment toward commodity-linked currencies.
Additionally, renewed trade tensions between the United States (US) and Canada have added to the CAD’s headwinds. Canadian Prime Minister Mark Carney said he had apologized to President Donald Trump over an anti-tariff advertisement that led to the suspension of bilateral trade negotiations. However, reports suggest that Trump rejected calls to resume talks, keeping uncertainty elevated around future trade relations.
With both weaker oil prices and renewed geopolitical friction weighing on sentiment, USD/CAD remains well-supported — and traders will be watching closely to see whether the pair can sustain its momentum above the 1.4100–1.4150 zone in the sessions ahead.
