Canadian Dollar Fundamentals (CAD)

Canadian dollar fundamentals are mostly about the United States. The US bought 71.7 percent of Canada’s merchandise exports in 2025 (Statistics Canada), so the loonie lives with the US economy, US trade policy and the gap between the Bank of Canada and the Federal Reserve. Oil is the other half of the story, and most of that oil goes to the US as well.

Oil, and which oil

Canada exported 4.3 million barrels of crude a day in 2025, and 90.1 percent of it went to the US. Those exports were worth C$140.0 billion (Canada Energy Regulator).

When oil rises, Canada earns more for what it sells and the loonie tends to follow. So a view on oil is already part of a view on USD/CAD, whether you meant it to be or not.

How closely the loonie follows has changed a lot, though. Take the monthly change in the price of WTI and the monthly change in the Canadian dollar against the US dollar. Their correlation, where 1 would mean they always moved together in proportion and 0 no steady link, was a weak 0.20 from 2000 to 2007, 0.64 from 2008 to 2014, 0.55 from 2015 to 2019 and 0.40 from 2020 to 2025. Split that last stretch where the yearly figures turned, at the end of 2022, and it was 0.54 for 2020 to 2022 and −0.15 for 2023 to 2025, in effect no link: the loonie moved the same way as oil in only 15 of 36 months. That split was chosen after seeing the data, so it describes those years rather than testing anything. The figures use monthly averages of WTI from the EIA and of USD/CAD from the Federal Reserve. They describe the past, and as the last three years show, the link can fade for years at a time.

Newcomers watch WTI and stop there. Canada’s heavy crude benchmark, Western Canadian Select (WCS), trades at a discount to WTI, and that discount moves for its own reasons, such as pipeline space. The Trans Mountain Expansion came online in May 2024 and nearly tripled that system’s capacity, to 890,000 barrels a day. The WCS discount averaged about US$18.70 a barrel from September 2023 to April 2024 and US$12.00 from June 2024 to July 2025 (Canada Energy Regulator). By mid-2025 crude exports to countries other than the US had more than tripled since the line opened.

The US next door, tariffs included

The tie to the US cuts both ways. Strong US demand pulls Canada along, and US tariffs hit it directly. The Bank of Canada wrote that average quarterly growth was “subdued in 2025, weighed down by US tariffs and slowing population growth” (Monetary Policy Report, January 2026).

Trade is starting to shift. In 2025 Canada’s exports to countries other than the US rose 17.2 percent, and the US share fell from 75.9 percent the year before (Statistics Canada). For the loonie a tariff headline can still matter as much as a move in oil.

The Bank of Canada against the Fed

The Bank of Canada aims to keep inflation at 2 percent, the midpoint of a 1 to 3 percent range, under an agreement with the government that is renewed every five years (Bank of Canada). It sets its rate on eight fixed dates a year (Bank of Canada). Four of them come with a Monetary Policy Report, in January, April, July and October, so on those dates you get the Bank’s full forecast along with the decision. Past decisions and the next date are on Bank of Canada Rate Decision.

Because the two economies are so close, the two central banks usually move in the same direction. USD/CAD trades the timing and the size of the gap between them.

2024 is a clean example. The Bank of Canada cut its rate to 4¾ percent on 5 June 2024 (Bank of Canada). The Fed held at 5¼ to 5½ percent in July (Federal Reserve) and made its first cut only on 18 September, by half a percentage point (Federal Reserve). For three and a half months the gap moved in the US dollar’s favour while the Fed waited.

Where the two policy rates stand now is on Interest rate differential by currency pair (and net of inflation on Real interest rates by currency), with the pair itself on USD/CAD fundamentals.

The data, and the Friday overlap

Canada Inflation Rate (CPI) is the main domestic release. Next to the headline, look at the Bank of Canada’s preferred core measures, such as CPI-trim and CPI-median (Bank of Canada). A headline pushed around by petrol prices says less about the next decision than they do. Why is explained in What Is Core Inflation?

Canada GDP Growth Rate shows how much room the bank has, and the Canada Manufacturing PMI covers the export side, where tariffs bite first.

Canada’s jobs report can land in the same minute as the American one. On Friday 7 August 2026, Statistics Canada released its Labour Force Survey at 8:30 a.m. Eastern time (Statistics Canada), the moment the US payrolls report came out (BLS). On those mornings USD/CAD trades the difference between two surprises, and a strong Canadian number can be swamped by a stronger US one. The US side is in What Is NFP (Non-Farm Payrolls)?

Positioning

The Canadian dollar COT report shows which way speculators lean in Canadian dollar futures. Use it to check whether the market has already positioned for the gap between the two central banks, or for the next tariff headline, before you add to the same side.

For the other side of the pair, read US Dollar Fundamentals (USD).