Canadian Dollar Appreciates After Strong Q3 GDP

The Canadian dollar weakened to near 1.41 per USD in November following weaker-than-expected domestic jobs data and stronger US employment figures. Canadian employment fell by 4,700 in October, improving from September’s 68,300 decline but missing forecasts for a 13,600 increase. Private-sector employment dropped by 53,000 (-0.4%), its first decline since February. A softer labor market could prompt the BoC to cut rates to support economic activity and encourage hiring, reducing the appeal of Canadian assets. However, Canada’s GDP grew 0.8% in Q2 2026, following a 0.1% expansion in Q1. Meanwhile, US nonfarm payrolls increased by 165,000, beating expectations and reinforcing prospects for a wider US-Canada interest-rate differential, supporting the greenback against the loonie. At its latest meeting, the BoC raised rates by 25 bps to 2.5%, its first hike since 2023. Annual inflation reached 3.1% in September, below forecasts of 3.2%.

The Canadian dollar weakened past 1.40 per USD, retreating from the two-month high of 1.39 reached on November 4th, as the US dollar gained on safe-haven demand following a sharp selloff in US equities. The Democrats won majorities in both chambers of the US Congress in the midterm elections, fueling concerns over tighter AI infrastructure regulations. Markets are also cautious ahead of employment reports from Canada and the US. Canadian employment is expected to rise by 13.6 thousand in October, following a 68.3 thousand decline in September, which was the steepest drop in seven months and well below expectations for a 7 thousand increase. The data may offer clues on the BoC’s policy outlook. At its latest meeting, the BoC raised rates by 25 bps to 2.5%, its first hike since 2023, as expected. Policymakers also raised their inflation and growth forecasts. Annual inflation reached 3.1% in September, its highest since May’s 3.2%, but below the 3.2% forecast.

The Canadian dollar strengthened sharply to 1.39 per USD in November, reaching a more than two-month high as the greenback retreated broadly following Democratic victories in the US midterm elections. The results prompted investors to reassess the outlook for US growth amid tighter scrutiny of AI investment and potential opposition to data-centre development. The loonie also gained on hopes of easing trade tensions between Canada and the US, as a Democratic majority could constrain some of President Trump’s trade policy decisions. The dispute began in February 2025, when Trump announced broad tariffs on Canadian goods, prompting retaliatory measures from Ottawa. While USMCA-compliant goods were later exempted, additional tariffs remained on steel, aluminum and automotive imports. Meanwhile, Canada posted a C$5.4 billion trade surplus in September, its largest since May 2022 and above expectations of C$4.1 billion.