The Canadian dollar weakened beyond 1.40 per USD, pulling back from the two-month high of 1.39 touched on November 4th, as the greenback strengthened on safe-haven demand following a sharp selloff in US equities. The Democrats’ victory in securing majorities in both chambers of the US Congress in the midterm elections heightened concerns over tighter regulations on AI infrastructure.
Markets are also cautious ahead of upcoming labor market data from both Canada and the United States. Canadian employment is forecast to increase by 13.6 thousand in October, after a steep decline of 68.3 thousand in September — the largest drop in seven months and far worse than expectations for a 7 thousand gain. The figures are being closely watched for signals regarding the Bank of Canada’s policy trajectory.
At its most recent meeting, the Bank of Canada raised its benchmark interest rate by 25 basis points to 2.5%, its first increase since 2023 and in line with expectations. Policymakers also upgraded their inflation and growth projections. Annual inflation reached 3.1% in September, the highest since May’s 3.2%, though slightly below the consensus forecast of 3.2%.