Canadian Dollar Gains Ground as Trade Sentiment Improves and U.S. Jobs Data Softens

The Canadian dollar was reported to have appreciated against its U.S. counterpart on Wednesday, driven by shifting investor sentiment surrounding global trade relations and renewed focus on U.S. labor market indicators. Market analysts noted that the loonie had climbed by approximately 0.4%, reaching a level of 1.3595 per U.S. dollar, equivalent to roughly 73.56 U.S. cents. This gain positioned the Canadian currency just shy of the two-week high of 1.3588 that had been touched earlier in the week.

The movement in the currency markets was attributed largely to developments in U.S. economic data and international trade announcements. According to a report issued by ADP, U.S. private payrolls were found to have contracted in June for the first time in over two years. Financial experts indicated that this softness in labor figures had amplified expectations of a less robust U.S. non-farm payrolls report, due to be released the following day. It was anticipated by economists that approximately 110,000 new jobs would be reflected in the official June data.

The unexpected decline in private-sector employment had led some currency strategists to suggest that downside risks for the broader labor market were likely to be reassessed. Marc Chandler, serving as chief market strategist at Bannockburn Global Forex LLC, had been quoted as observing that the weaker ADP figures added significant weight to the prospect of a subdued employment outcome in the official data.

Meanwhile, international trade developments also contributed to the Canadian dollar’s upward movement. U.S. President Donald Trump had been reported to have confirmed a reduction in previously threatened tariffs on a range of Vietnamese exports. The imposition of tariffs at a lower rate than initially proposed was interpreted by markets as a signal that further progress in global trade negotiations could follow. Kevin Ford, an FX and macroeconomic strategist at Convera, remarked that the announcement had generated optimism about the possibility of new trade deals with key economic partners in the near term.

At the same time, the price of crude oil—a key Canadian export—had surged by 3.1%, settling at $67.45 per barrel. The oil rally was linked to geopolitical tensions, as Iran had announced that it would suspend cooperation with the United Nations’ nuclear watchdog agency. While there was no immediate supply disruption reported, the decision had reintroduced a risk premium into the energy markets, thereby supporting commodity-linked currencies such as the Canadian dollar.

However, economic indicators on the domestic front presented a less upbeat picture. Data released for Canada’s manufacturing sector in June revealed a deeper contraction, as the impact of U.S. tariffs continued to dampen external demand. The S&P Global Canada Manufacturing Purchasing Managers’ Index (PMI) had been recorded at 45.6 in June, falling further from the May figure of 46.1. A reading below 50 is generally understood to indicate a contraction in the manufacturing sector, suggesting that Canadian producers remained under pressure.

Despite these challenges in the industrial sector, Canadian bond yields had been observed to rise as markets reopened following the Canada Day holiday. The 10-year government bond yield had increased by 9.2 basis points to reach 3.366%, having briefly touched 3.380%, the highest level since mid-June. The steepening of the yield curve suggested that investors were pricing in expectations of higher interest rates or longer-term inflation risks, a sentiment that had also been mirrored in movements seen in U.S. Treasury markets. Fiscal concerns in the United States, particularly relating to deficit financing, had contributed to the uptick in yields across North American markets.

In sum, the Canadian dollar’s strengthening was seen as a multifaceted response to global and domestic cues. While geopolitical risk and energy market dynamics provided support, the undercurrents of caution remained due to signs of weakness in both the U.S. labor market and Canadian manufacturing output.