Loonie

It was a dramatic February open for USD/CAD and the tariff date was pushed back to March 1st, setting the stage for a similar weekend as the month concludes next week.

USD/CAD has maintained a strong downward trend in recent sessions, falling by more than 1% over the last five trading days, as the Canadian dollar continues to gain ground.

USD/CAD broke support as the U.S. Dollar broke down this week even after strong inflation prints out of the U.S., suggesting that Trump tariffs are losing their drive for USD-strength.

USD/CAD set a fresh four-year-high late in the week and bulls retain control as President-elect Trump is set to be inaugurated on Monday.

USD/CAD hasn’t yet set a fresh high in 2025 even as U.S. Dollar strength has continued. The pair matched its largest down-day in a year after news of Justin Trudeau’s resignation.

Despite the recovery shown by the Canadian dollar two sessions ago, the balance has now shifted 0.5% higher in favor of the U.S. dollar, keeping USD/CAD near levels not seen in the past four years.

At FOREX.com, we try to avoid writing about the same currency pair two trading days in a row, but occasionally big new developments make it impossible to avoid.

Last week, we highlighted how USD/CAD saw a momentary bout of weakness (loonie strength) after the Bank of Canada raised interest rates before reversing sharply back to the topside as oil prices collapsed...

As we noted in our Bank of Canada Preview report, today’s BOC meeting was never really about if the central bank would raise interest rates (even after last night’s escalation in the global trade war); instead, traders were focused on BOC policymakers’ outlook for future economic growth and what that would mean for interest rates moving forward.

USD/CAD has tentatively broken out above a key descending trendline and triangle consolidation.

The USD/CAD has collapsed after its parabolic rise ended in mid-January, when oil prices first showed signs of stabilisation. Since peaking at just shy of 1.4700, the Loonie has tumbled to below 1.30, hitting a low of 1.2925 last week. It has shed in the process some 1765 pips from the high to the low, or almost 23 per cent in the space of only nine weeks. At the start of this week, the USD/CAD has bounced back somewhat. It is interesting to note that the CAD has weakened here despite the strong Canadian retail sales data that we saw at the end of last week. With oil prices also looking constructive, the rebound in this currency pair looks to be driven by the US dollar rather the Canadian dollar. As such, it is unlikely to last.

As expected, the first major central bank “decision” of the week was not much of a decision at all. Earlier this morning, the Bank of Canada opted to leave interest rates unchanged at 0.50%, as all 11 primary dealers surveyed by the Wall Street Journal expected.

Heading into today’s big BOC decision, it felt like USD/CAD bears just needed to get put out of their misery. After all, the Canadian dollar had lost 11% of its value against the US dollar in last three months alone, to say nothing of the larger move from sub-parity levels in USD/CAD less than three years ago. Of course, the proximate cause of the weakness has been the renewed drop in oil prices, Canada’s most important export. The economic impact of the collapse in oil prices cannot be understated: it has impacted nearly every aspect of the Canadian economy, from employment to manufacturing activity to inflation to consumer confidence.