Canadian Dollar weakens as Oil price volatility outweighs hawkish BoC comments

USD/CAD recovers as volatile oil prices see the Canadian Dollar relinquish earlier gains.
Persistent inflation risks could warrant further rate rises, BoC Governor Tiff Macklem indicates.
Robust US jobs figures underpin the US Dollar ahead of Friday’s Canadian and US employment releases.

At around 1.3993 at the time of writing, USD/CAD is virtually unchanged on Tuesday, having recovered from an intraday low of 1.3950. The Canadian Dollar (CAD) has relinquished its earlier gains as the US Dollar (USD) firms and oil prices fluctuate. Meanwhile, traders are weighing hawkish comments from Bank of Canada (BoC) Governor Tiff Macklem.

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As Canada is a major crude exporter, oil price fluctuations have a bearing on the Loonie. An earlier rise in crude on Tuesday followed a Wall Street Journal (WSJ) report of a US strike on Iran’s Qeshm Island. Prices subsequently retreated amid unconfirmed reports of concessions by Washington and Tehran concerning Iran’s nuclear programme and frozen funds. West Texas Intermediate (WTI) has since recouped some losses, trading flat at around $95 a barrel.

During his parliamentary appearance, BoC Governor Macklem cautioned that “further rate hikes may be needed,” while emphasising that, given heightened uncertainty, future decisions would be made “meeting by meeting”. He pointed to higher oil prices and refinery margins pushing up costs for consumers and businesses. More of these costs are expected to pass through to inflation over the coming year.

According to Macklem, CPI inflation is forecast to reach “3.5% by year-end” and stay “at or above 3% through much of 2027” before moving back towards the BoC’s 2% target by mid-2028.

Uncertainty over US-Iran negotiations and a hawkish outlook for the Fed are helping the US Dollar hold steady. Better-than-expected US jobs figures have also supported the Greenback. However, with the US midterm elections under way, traders remain wary of taking aggressive positions.

September’s JOLTS Job Openings climbed from 7.19 million to 7.523 million, above the forecast of 7.13 million. Having rebounded from an intraday low of 101.63, the US Dollar Index (DXY) is trading flat at around 101.80. The index measures the currency against six major peers.

Friday brings employment figures from both countries, with Canada’s Labour Force Survey and US Nonfarm Payrolls (NFP) now in focus. As traders weigh the possibility of further rate rises in December, the releases could influence expectations for the next policy moves by the BoC and the Fed.

Canadian Dollar Outperforms Japanese Yen Today

Today’s percentage moves in the Canadian Dollar (CAD) against the major currencies listed are set out below. The Canadian Dollar recorded its strongest performance against the Japanese Yen.

	USD	EUR	GBP	JPY	CAD	AUD	NZD	CHF
USD		-0.02%	-0.07%	0.38%	0.00%	0.36%	0.02%	0.30%
EUR	0.02%		-0.04%	0.37%	0.02%	0.38%	0.04%	0.31%
GBP	0.07%	0.04%		0.43%	0.07%	0.42%	0.08%	0.36%
JPY	-0.38%	-0.37%	-0.43%		-0.36%	-0.01%	-0.34%	-0.06%
CAD	0.00%	-0.02%	-0.07%	0.36%		0.36%	0.02%	0.30%
AUD	-0.36%	-0.38%	-0.42%	0.01%	-0.36%		-0.32%	-0.06%
NZD	-0.02%	-0.04%	-0.08%	0.34%	-0.02%	0.32%		0.28%
CHF	-0.30%	-0.31%	-0.36%	0.06%	-0.30%	0.06%	-0.28%

Percentage movements between the major currencies are displayed in the heat map. Select the base currency in the left-hand column and the quote currency in the top row. To read CAD (base)/USD (quote), for instance, choose the Canadian Dollar on the left and follow its row across to the US Dollar column. The intersecting cell gives the percentage change for that pair.