The Canadian dollar steadied on Tuesday after hitting a six-month low, bouncing back as Jerome Powell hinted at more Fed rate cuts ahead. The loonie sat nearly unchanged at 1.4034 per U.S. dollar—that’s 74.21 U.S. cents—after briefly touching 1.4079, its weakest intraday level since April 10.
What’s interesting here is how Powell’s dovish tone managed to prop up the currency despite oil prices taking a beating. Crude settled 1.3% lower at $58.70 a barrel, dragged down by warnings from the International Energy Agency about a massive supply glut coming in 2026. Add in those nagging U.S.-China trade tensions, and you’d expect the loonie to struggle more than it did.
Powell spoke carefully about taking things meeting-by-meeting on further rate cuts, trying to balance job market weakness against inflation that’s still well above the 2% target. Wall Street stocks rose and the U.S. dollar lost ground against a basket of major currencies as traders digested his comments.
Sal Guatieri, senior economist at BMO Capital Markets, put it bluntly in a note: “Barring a particularly bad CPI release on October 24, or a sharp improvement in some labour market indicators, there’s little reason for the FOMC not to continue trimming rates again.” That’s pretty much what markets wanted to hear. Powell didn’t push back against expectations of rate cuts at the final two meetings of the year.
Back home, domestic data barely moved the needle. Building permits issued fell 1.2% in August from July, hitting the lowest level since June 2024. Canadian bond yields fell across the curve, tracking U.S. Treasuries as the market reopened following Thanksgiving Day holiday. The 10-year yield dropped 2.4 basis points to 3.145%, after touching 3.124%—its lowest since May 8.
Oil being one of Canada’s major exports usually means crude prices matter a lot for the loonie, but not this time.