Canadian Dollar falters as Canada loses 68.3K jobs in September

October 9, 2026

USD/CAD Sees Gains Amid Canadian Dollar Weakness

On Friday, the USD/CAD pair increased as the Canadian Dollar (CAD) fell sharply following a discouraging domestic employment report. A robust US Dollar (USD) added further support to the pair. Currently, USD/CAD is trading around 1.4276, a level not observed since April 2025.

Statistics Canada revealed a decline in employment of 68.3K in September, contrary to economists’ expectations of a modest increase of 7K. This decline follows an earlier loss of 41.7K jobs in August. The unemployment rate edged up to 6.5% from 6.4%, while the participation rate in the labor force decreased to 64.8%, marking its lowest point since December 1997, excluding the pandemic period.

The widening slack in the labor market, combined with inflation lingering close to the Bank of Canada’s (BoC) 2% target, limits the ability of policymakers to raise interest rates. Following the report, Canadian government bond yields decreased, with the two-year yield falling by more than 8 basis points to approximately 3.199%.

Meanwhile, the US Dollar maintains a strong position across the board, nearing an 18-month high. This strength is attributed to market anticipations that the Federal Reserve (Fed) will implement another interest rate hike before this year concludes. The US Dollar Index (DXY), which measures the Greenback against a basket of six major currencies, is around 102.30 after bouncing back from an intraday low of 101.92.

Heightened US Treasury yields further bolster the Greenback, with the two-year US Treasury yield hovering near 4.797%, about 160 basis points higher than its Canadian counterpart. This significant yield gap presents a considerable challenge for the Canadian Dollar, overshadowing any benefits from rising oil prices attributable to Middle Eastern supply risks.

Comments from the Fed also indicate a hawkish stance. St. Louis Fed President Alberto Musalem stated on Thursday that “to bring inflation back to target, more monetary policy firming will be required.” Similarly, Fed Governor Christopher Waller hinted at “additional hikes” if economic data evolves as anticipated.

Looking ahead, market attention will shift to the preliminary October University of Michigan Consumer Sentiment Index, as well as the one-year and five-year inflation expectations.