Toronto: The Canadian dollar edged lower against the U.S. dollar on Wednesday as oil prices declined and investors assessed the outlook for a potential sectoral trade deal between Canada and the United States.
The loonie traded 0.1% lower at 1.4050 per U.S. dollar, or 71.17 U.S. cents, after fluctuating between 1.4027 and 1.4059. The currency had touched a six-month low of 1.4079 on Tuesday.
Canada is currently negotiating with the U.S. in key industrial sectors, including steel, aluminium, and automotive manufacturing, all of which have faced tariff pressures in recent years.
Shares of Algoma Steel (ASTL.TO) surged 8.5% on Wednesday amid optimism surrounding the talks.
“The market for CAD is pricing in some kind of deal, but the contours of that are impossible to estimate,” said Adam Button, Chief Currency Analyst at investingLive. “There’s a lot riding on this — it’s the dress rehearsal for the big negotiation.”
The existing United States–Mexico–Canada Agreement (USMCA), which protects most Canadian exports from U.S. tariffs, is scheduled for joint review in 2026.
Canadian dollar dips as investors assess sectoral trade deal prospects https://t.co/508sYG7UnA https://t.co/508sYG7UnA
— Reuters Business (@ReutersBiz) October 16, 2025Oil and Market Drivers
Oil, one of Canada’s top exports, fell 0.7% to $58.27 a barrel, pressured by renewed U.S.–China trade tensions and a forecast from the International Energy Agency (IEA) predicting a global supply surplus in 2026.
Meanwhile, the U.S. dollar weakened slightly against major currencies after Federal Reserve Chair Jerome Powell signalled the likelihood of interest rate cuts in the coming months.
Canada’s August wholesale trade dropped 1.2% from July, while manufacturing sales declined 1%, according to Statistics Canada data.
Read: Canada to Lift USMCA Tariffs, Seeks New US Trade Deal
Investors are now focused on Bank of Canada Governor Tiff Macklem’s scheduled speech on Thursday, where he is expected to discuss Canada’s economic outlook. Markets currently price in a 60% chance of another rate cut at the October 29 policy meeting.
Canadian bond yields eased across the curve. The 10-year yield declined 3.1 basis points to 3.124%, after briefly touching 3.102%, its lowest level since May 7.
