Posthaste: Here’s why the Canadian dollar could avoid falling off the 70-cents ledge

Operations At The Royal Canadian Mint As Loonie Steady Before Home Price Data — The Canadian dollar has had a tumultuous 2026. (Credit: Shannon VanRaes)

It looks like the Canadian dollar has turned away from falling below 70 cents U.S., even after the United States declined to renew the Canada-U.S.-Mexico Agreement (CUSMA), kick-starting annual reviews of the three-way pact.

The loonie came perilously close to breaching that threshold as June wound down, but it pulled back from the ledge and posted tentative gains on Thursday after falling to a year-to-date low of 70.26 cents U.S. on June 24.

“In theory, the decision (on CUSMA) adds to the headwinds facing the loonie from a weak economy, falling oil prices and a neutral Bank of Canada,” Karl Schamotta, chief market strategist at Corpay, a corporate payments company, said in a note on Thursday. “But the move was well telegraphed, and may already be priced in, suggesting the risk profile facing the currency may not be as negative as some have suggested.”

It has been a tough year for the Canadian dollar, which is down just over three per cent from the start of year and off nearly five per cent from the closing high of 74 cents U.S. reached on Jan. 29.

The loonie has faced several headwinds including a global flight to the U.S. dollar, due partly to investors seeking safety after the break out of the Iran conflict.

Data from the International Monetary Fund indicated that official currency reserves of the U.S. dollar rose in the first quarter of 2026 and “by no little bit,” Warren Lovely, chief rates strategist at National Bank of Canada, said in a report on Thursday.

Lovely said the buying coincided with the war in Iran, but that the longer de-dollarization trend is probably still intact.

Canada’s currency also suffered as bets rose that the U.S. Federal Reserve would need to hike interest rates to combat oil-induced inflation from the war. That caused the yield on Canadian and U.S. bonds to widen further in favour of Treasuries leaving the greenback much more attractive to investors.

On Thursday, that dynamic eased slightly in favour of the loonie as the U.S. Bureau of Labor Statistics reported just over 57,000 positions were created in June, well off estimates for 113,000 additions to the jobs market. Meanwhile, numbers for April and May were also revised lower, adding up to a two-month loss of almost 75,000 jobs.

In the wake of the data release, bets for a rate hike at the July 29 Fed meeting weakened to an 18 per cent chance from a nearly 30 per cent chance, while markets cut the odds of an increase in September to around 60 per cent from 80 per cent, according to overnight interest rate swap data from Bloomberg. However, markets were still all in on a hike in October.

That could ramp up the pressure on the loonie as it would widen the interest rate differential between the Fed and the Bank of Canada, which has been on hold for the last five consecutive rate calls, with most economists expecting it to stay the course at the current level of 2.25 per cent well into 2027.

“We don’t think that easier policy is at all likely, but we too are unconvinced that hikes will materialize,” rates strategist Taylor Schleich and rates analyst Vy Le at the National Bank of Canada, said in a note on June 29. “If our projection bears out, the Canadian dollar may be able to find some traction after rate differentials — along with oil and gold — have weighed on it lately.”

However, Sarah Ying, head of currency strategy at CIBC Capital Markets’ fixed income, commodity and currency unit, warned in a note Thursday that despite “a well-anticipated” outcome of the July 1 CUSMA review, more friction could lie ahead for the loonie, especially around Rules of Origin that call for more U.S. content in manufactured goods.

“For now, the Canadian dollar remains predominantly driven by the U.S. dollar leg,” she said.

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“I have no idea what a quantum is, but I know we’re crushing it,” Mercer said in a Business Development Bank of Canada television ad, promoting the country’s prowess in the futuristic technology.

But Mercer — and others — may know soon. The markets dubbed 2025 the year of quantum following a string of breakthroughs that turned even Nvidia Corp. chief executive Jensen Huang into a quantum bull and ignited a wave of investor interest and public listings, including one by Toronto-based Xanadu Quantum Technologies Inc. — Yvonne Lau, Financial Post

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Today’s Posthaste was written by Gigi Suhanic with additional reporting from Financial Post staff and Bloomberg.

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