As September begins, the Canadian foreign exchange (FX) market reflects a mix of resilience and caution. The Canadian dollar (CAD) continues to be influenced by oil markets, domestic growth figures, and global monetary policy shifts. With summer volatility easing, investors now turn their attention to the Bank of Canada’s autumn stance and the broader global economic outlook.

Bank of Canada Prepares for Fall Decisions

The Bank of Canada (BoC) is expected to hold its benchmark rate at 3.25% during the September 10 meeting. While inflation remains anchored near the 2% target, policymakers remain cautious about household debt levels and uneven wage growth.

BoC officials have emphasized data dependency, with particular focus on upcoming inflation and retail sales figures before considering any changes to monetary policy.

CAD Market Performance

The Canadian dollar started September trading around 1.3350 USD, showing stability after a quiet August.

• Oil Support: Crude oil prices have rebounded to $85 per barrel, giving the CAD a modest lift.
• U.S. Dollar Weakness: The U.S. dollar has softened due to expectations of a slower Federal Reserve tightening path, supporting CAD momentum.
• Investor Mood: FX volatility remains subdued, with cautious optimism across global markets.

Key Economic Indicators

• GDP Growth: Canada’s Q2 GDP rose by 0.3%, exceeding expectations and signaling resilience in the face of global uncertainties.
• Labor Market: The unemployment rate edged slightly higher to 6.8%, as hiring slowed in retail and manufacturing sectors.
• Housing Trends: National home prices cooled slightly in August, reflecting seasonal patterns and affordability pressures.

“Currencies don’t move in isolation; they mirror the balance between domestic resilience and global uncertainty.”

Global Influences

• China Demand Outlook: Continued recovery in Chinese industrial activity has boosted Canadian resource exports, particularly metals and agriculture.
• Geopolitical Risks: Trade disputes in Asia and persistent conflicts in Eastern Europe remain a background risk but have not yet shaken CAD stability.
• U.S. Federal Reserve: The Fed’s dovish signals suggest an extended pause in rate hikes, narrowing the Canada-U.S. interest rate gap

September Outlook

The CAD is expected to remain range-bound in the early weeks of September, supported by firm commodity prices and steady domestic fundamentals. However, volatility could return if inflation surprises or global trade tensions flare.

For now, Canada’s currency reflects a theme of measured stability amid global uncertainty—a tone likely to guide markets into the fall.