Canadian Dollar Hits 9-week High

The Canadian dollar strengthened to 1.39 per USD, posting a third consecutive weekly gain as yield spreads narrowed. Domestic factory data supported the recent narrowing in the gap between US and Canadian bond yields. The spread between Canada’s 2-year yield and the US equivalent has narrowed by about 17 basis points this month. Canadian factory sales rose 0.1% in June from May, marking a fifth consecutive monthly gain, while sales volumes increased 1.2%. Meanwhile, US retail sales unexpectedly fell in July by the most in more than a year. Recent data also showed a stronger Canadian labor market and weaker US employment, reducing expectations for a Federal Reserve rate hike this year while raising the prospect of a BoC hike if energy prices remain elevated. Canada’s economy is estimated to have expanded at an annualized 3.4% in the second quarter, well above the Bank of Canada’s 2.5% forecast.

The Canadian Dollar touched 1.39 against the USD, the highest since June 2026. Over the past 4 weeks, US Dollar Canadian Dollar lost 0.94%, and in the last 12 months, it increased 0.66%.

The Canadian dollar strengthened to an eight-week high of 1.39 per USD as stronger-than-expected domestic employment data narrowed yield differentials between Canada and the US. Canadian employment rose by 75,100 jobs in July, far exceeding expectations for a 15,000 gain, while the unemployment rate fell to a two-year low of 6.4%. Meanwhile, the US economy unexpectedly shed jobs in July, and previous nonfarm payrolls were revised sharply lower. The stronger Canadian labor market raised the prospect of a BoC rate hike if energy prices remain elevated, while weaker US employment data reduced expectations of a Federal Reserve hike this year. Meanwhile, recent data suggests Canada's economy expanded an annualized 3.4% in the second quarter. Well above the Bank of Canada's expectation of a 2.5% growth rate.