Canadian dollar slips from six-week high ahead of key jobs report

what happened

According to Reuters, the Canadian dollar extended its retreat from a six-week high against the US dollar on Tuesday, trading at 1.40 per greenback, or 74.21 US cents. Oil, one of Canada's main exports, dropped to a near three-week low as talks aimed at ending the conflicts in Ukraine and Iran advanced. US crude futures settled 0.4% lower at $96.09 a barrel.

Last week the Bank of Canada raised its benchmark rate for the first time in three years and said more increases might be needed to stop soaring energy costs from feeding into broader inflation. Governor Tiff Macklem repeated on Tuesday that further hikes could be necessary. Sebastien Mc Mahon, chief economist at iA Financial Group, argued that the peak of hawkish rhetoric may already be behind us, and a weak October jobs report could push markets to drop some of the 2027 hikes they currently price in.

Analysts expect the economy to add 13,600 jobs when October employment data is released on Friday. The swap market prices in roughly 70 basis points of further tightening by the end of 2027. The Canadian 10-year yield rose 1.8 basis points to 3.771%, after earlier touching 3.727%, its lowest level since September 2.

why it matters

Friday's employment figures are the key event for the currency: weak data could reduce bets on further rate increases and weaken support for the loonie. Because Canada relies heavily on oil exports, the currency also stays sensitive to news from the Ukraine and Iran negotiations.

market impact

Canadian dollar: falling oil and jobs-data expectations weigh on the currency

• ▼Canadian dollar pressure down — falling oil removes support for the currency while markets await jobs data

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