The Canadian dollar traded near 1.42 per USD in July, hovering close to a one-year low as the drag from weaker oil prices outweighed support from a softer US dollar following disappointing US employment data. The loonie continued to face headwinds from lower global oil prices, which have eroded Canada’s terms-of-trade advantage and reinforced expectations that the Bank of Canada will maintain a dovish stance if disinflation persists.
Domestic indicators offered only modest support, with data pointing to subdued manufacturing growth and a labor market that, while still soft, shows tentative signs of stabilizing. Under these conditions, the BoC is widely expected to keep policy rates on hold. At the same time, uncertainty over negotiations to revise the USMCA has weighed on the economic outlook and further reduced the likelihood of future rate hikes.
The US dollar, meanwhile, remained under pressure at the turn of the month, as weaker US jobs figures dampened expectations for a near-term rate increase by the Federal Reserve.
