• USD/CAD edges higher near 1.3950 as the US Dollar rebounds despite earlier losses on soft data and shutdown worries.
• The Greenback’s recovery gains support after the US Supreme Court blocks President Trump’s bid to remove Fed Governor Lisa Cook.
• Weaker Canadian factory activity and falling oil prices weighed on the Loonie, offsetting the drag from soft US labor and PMI data.

The Canadian Dollar (CAD) trades on the back foot against the US Dollar (USD) on Wednesday, with USD/CAD edging higher around 1.3950 as the Greenback recovered ground after an initial dip on softer US data and lingering uncertainty over the partial government shutdown.

The US Dollar’s recovery was partly supported by news that the US Supreme Court refused to let President Donald Trump immediately remove Federal Reserve (Fed) Governor Lisa Cook. The US Dollar Index (DXY), which tracks the Greenback's value against a basket of six major currencies, steadies after slipping to a one-week low, last seen edging back to 97.77, retracing part of its earlier decline.

US data released earlier in the day pointed to softer labor market conditions and mixed business activity. The ADP Employment Change showed private-sector employment in the United States (US) declined by 32,000 in September, a sharp disappointment compared with expectations for a 50,000 increase. Adding to the downside surprise, August’s figure was revised sharply to a 3,000 decline from the previously reported 54,000 gain.

The S&P Global Manufacturing Purchasing Managers Index (PMI) eased to 52 in September from 53 in August, indicating a slower pace of expansion as tariffs weighed on exports and new orders. The ISM Manufacturing PMI inched up to 49.1 from 48.7 in August, but remained below the 50-point threshold that separates growth from contraction.

Canada’s manufacturing sector remained a drag on the Loonie. The S&P Global Manufacturing PMI fell to 47.7 in September from 48.3 in August, marking an eighth consecutive month of contraction. The report highlighted faster declines in output and new orders, subdued business confidence, and ongoing tariff-related cost pressures, with firms continuing to cut jobs and inventories.

Commenting on the latest survey results, Paul Smith, Economics Director at S&P Global Market Intelligence, noted that “one of the positives from the latest report is a dissipation of price pressures, with both input costs and selling prices rising at slower rates. This will provide reassurance to Bank of Canada ( BoC) policymakers that a reduction in underlying inflation pressures is underway and provide further justification for September’s cut in interest rates.”

Adding to the Loonie’s woes, West Texas Intermediate (WTI) crude fell to around $61.50 per barrel, slipping to its lowest level since September 5 after the US Energy Information Administration (EIA) reported a 1.79-million-barrel build in crude stockpiles, compared with expectations for a slight draw of 0.05 million barrels and the prior week’s 0.61-million-barrel decline.