2026.01.1213:59:02UTC+00Canadian Dollar Rebounds from 1-Month Low

The Canadian dollar is inching towards 1.39 against the US dollar, recovering from a recent slump near 1.391 reached on January 9th. This is happening amidst a broader weakening of the US dollar. However, any appreciation of the Canadian dollar is restricted by declining indicators in the domestic labor market and a tougher oil environment. The US dollar's dip can be attributed to fresh apprehensions about the Federal Reserve's independence following news of a Justice Department investigation into Chair Jerome Powell. Additionally, there is speculation regarding further interest rate cuts by the Fed, prompted by December's nonfarm payroll figures falling short of expectations. In Canada, the unemployment rate has risen to 6.8%, as labor force participation increased and hiring decelerated, supporting the Bank of Canada's view that current monetary policy, at a rate of 2.25%, is adequately restrictive. On another note, crude oil prices have not provided significant support for Canada's trade terms. West Texas Intermediate (WTI) crude remains in the high $50s per barrel, while heavy Canadian sour grades are trading at a substantial discount. This has compressed export revenues and has limited any potential gains for the Canadian dollar.