Canadian Dollar weakens as Oil prices remain low and the US Dollar stays strong
Canadian Dollar Weakens as US Dollar Maintains Strength
The Canadian Dollar (CAD) lost ground against the US Dollar (USD) on Tuesday, with the USD/CAD pair maintaining an upward trend. The US Dollar remained resilient, even as Federal Reserve (Fed) officials offered cautious remarks and US S&P Global Purchasing Managers Index (PMI) figures came in softer than expected.
As of the latest update, USD/CAD was trading close to 1.3780. Meanwhile, the US Dollar Index (DXY)—which measures the Greenback against a selection of major currencies—was near 98.57 after dipping to a daily low of 98.16.
US Economic Activity Shows Signs of Slowing
According to S&P Global’s most recent survey, the US services sector continued to grow at the end of 2025, but the pace of expansion slowed. The Services PMI dropped to 52.5 in December from November’s 54.1, and was revised down from the preliminary 52.9 reading. This marks the slowest growth rate in approximately eight months.
The Composite PMI also declined, falling to 52.7 in December from 54.2 in November, indicating a slowdown in both manufacturing and services. S&P Global highlighted that new orders increased only slightly, representing the weakest growth in nearly twenty months.
Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, commented that while business activity continued to rise in December, capping off another quarter of solid growth, there are emerging signs of strain in the US economy. He noted that many businesses anticipate that lower interest rates and supportive government policies could help revive demand as the new year unfolds.
Federal Reserve Officials Signal Cautious Approach
On the policy front, Fed representatives adopted a careful yet slightly dovish stance on Tuesday. Richmond Fed President Thomas Barkin emphasized the importance of monitoring both inflation and employment, stating that the current interest rate is within a neutral range and that future decisions will require careful calibration due to risks on both sides.
Additionally, Fed Governor Stephen Miran expressed his expectation that upcoming data will continue to support the case for rate cuts. He cautioned that overly restrictive policy could hinder economic growth, but remained positive about the overall economic outlook.
Canadian Dollar Faces Headwinds Amid Quiet Domestic Scene
In Canada, a sparse economic calendar and muted Oil prices have provided little support for the Loonie. West Texas Intermediate (WTI) crude hovered near $58.00, struggling to extend gains from the previous session as investors weighed the impact of US military actions in Venezuela and the prospects for Venezuelan oil exports.
Key Data Releases Ahead
Looking forward, markets are focused on the upcoming US Nonfarm Payrolls (NFP) report and Canadian employment data, both scheduled for release on Friday. These reports are expected to significantly influence expectations for future policy moves by the Fed and the Bank of Canada (BoC) in the coming months.
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
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