Canadian Dollar Rallies As Trade Surplus Widens to 4.2 Billion Dollars
The Canadian dollar strengthened by 0.3% against the US dollar on Tuesday, trading at 1.4220, or 70.32 US cents, according to Reuters. This recovery followed a sharp drop on Monday when the currency touched an 18-month low of 1.4293. The primary driver behind the loonie’s rebound was a significantly wider-than-expected Canadian trade surplus for August, alongside a broader pullback in the greenback across global markets.
August Trade Surplus Surges Ahead of New Tariffs
Canada recorded a trade surplus of C$4.2 billion ($2.94 billion) in August. This figure far exceeded the consensus forecasts of economists, who had anticipated the surplus would expand to C$1.55 billion from an upwardly revised C$787 million, Reuters reported. Exporters rushed to increase shipments to the United States before new tariffs implemented by President Donald Trump took effect.
The unexpected trade data provided immediate relief to the domestic currency. Rahim Madhavji, president at KnightsbridgeFX.com, noted that the loonie was largely on the defensive before starting to rally on the trade surplus news, while the US dollar was potentially a little overbought.
US Dollar Pullback and Falling Oil Prices Shape Foreign Exchange
The greenback fell against a basket of major currencies on Tuesday due to a drop in French government bond yields, which cooled fears about strains in euro zone debt markets. Meanwhile, US crude oil futures fell 0.3% to $89.19 a barrel. Supply concerns eased following increased Middle Eastern crude exports and an agreement by Group of Seven countries to release emergency diesel and crude stockpiles.
September Employment Data Awaited for Economic Cues
Markets are now looking toward upcoming domestic indicators to assess the broader economic outlook. Canadian employment data for September, scheduled for release on Friday, is expected to provide further clues on the state of the economy. Economists surveyed expect a net job gain of 9,200, with the national unemployment rate projected to edge up to 6.5% from 6.4% in August.
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