Canadian dollar price struggles near $1.42 as oil falls and domestic data disappoints
Canadian dollar slips as crude oil falls and employment data disappoints
The Canadian dollar traded near 1.42 against the U.S. dollar on Tuesday, pulling back from its recent four-month high of 1.41 reached on April 3. The decline was fueled by a combination of external and domestic headwinds, notably a deepening rout in crude oil markets and softening Canadian economic indicators.
Crude oil, a cornerstone of Canada's export economy, recently tumbled to a four-year low, weighing heavily on the commodity-linked loonie. The pressure intensified as geopolitical tensions mounted following U.S. President Donald Trump’s sweeping tariffs and China’s retaliatory actions, which heightened fears of a global economic slowdown and increased demand for safe-haven currencies like the U.S. dollar.
USD/CAD price movement (February 2025 - April 2025) Source: TradingView
Domestic fragility amplifies currency risk
On the domestic front, March labor data revealed the loss of 32,600 jobs and a jump in unemployment to 6.7%, casting doubts over Canada’s near-term growth trajectory. The weakness was further compounded by structural vulnerabilities in key industries such as autos, steel, and aluminum, which are facing continued tariff-related uncertainty. Analysts say this combination of soft macroeconomic signals and external trade risks is likely to push the Bank of Canada into a more dovish policy stance.
Adding to investor anxiety is the looming snap election set for April 28, which is injecting political uncertainty into financial markets. While the Canadian dollar initially gained ground after Canada was spared from the latest round of U.S. import levies, analysts warn that the market may be underestimating the broader implications of escalating trade barriers.
Monex Europe noted that recent gains in the loonie appeared complacent given the broader risk environment. “We continue to expect the Canadian dollar to soften as markets work through the full implications of U.S. tariff impacts,” the firm stated in a note.
In earlier coverage, we highlighted how the Canadian dollar's strength was largely driven by its exemption from Trump’s immediate tariff measures. However, with oil sliding and jobs data weakening, the loonie may now face a steeper path ahead unless risk sentiment recovers or the Bank of Canada surprises markets with a hawkish tilt.
