Currencies July 2, 2026 04:22 PM

Canadian dollar strengthens to 10-day high after softer US payrolls and brighter Canadian manufacturing data

Loonie gains as US jobs data cools rate-hike expectations and domestic factory output edges higher

By Jordan Park
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The Canadian dollar firmed to its strongest level in 10 days versus the US dollar on Thursday after US employment figures signaled a slowing labor market and Canada posted modest manufacturing expansion. The move reflected a reduction in near-term Fed rate-hike expectations and a modest uptick in Canadian production and employment within the factory sector.

Canadian dollar strengthens to 10-day high after softer US payrolls and brighter Canadian manufacturing data
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Key Points

  • Canadian dollar rose to 1.4175 per US dollar (70.55 US cents), reaching an intraday high of 1.4147 - the strongest since June 22.
  • US job growth slowed in June, with payroll gains for the prior two months revised lower, prompting markets to scale back near-term Fed rate-hike expectations and weakening the US dollar.
  • Canada’s manufacturing PMI increased to 53.0 in June from 52.9 in May; oil settled 0.2% higher at $68.69 per barrel, both factors supporting the loonie.

The Canadian dollar advanced to a 10-day peak against the US dollar on Thursday as weaker-than-expected US employment data weighed on the greenback and domestic manufacturing indicators showed continued growth.

Trading 0.3% stronger at 1.4175 per US dollar - equivalent to 70.55 US cents - the loonie reached an intraday high of 1.4147, its strongest intraday level since June 22. The move came amid data showing US job growth slowed in June, and payroll gains for the prior two months were revised downward.

Market participants interpreted the US labor data as evidence of a cooling labor market, prompting traders to cut back on expectations for an imminent interest-rate increase from the Federal Reserve. As a result, the US dollar fell against a basket of major currencies, providing support to the Canadian currency.

"Coming after two months that saw solid nonfarm payroll beats recorded, this latest data has helped to dent a growing Fed rate hike narrative, and in turn, the dollar," Nick Rees, head of macro research at Monex Europe, said in a note.

Energy market dynamics were also in play. Oil, one of Canada’s key exports, settled 0.2% higher at $68.69 per barrel on the session, a factor that can provide underlying support to the loonie given Canada’s role as a major oil producer.

On the domestic data front, Canada’s manufacturing sector registered slightly stronger activity in June. The S&P Global Canada Manufacturing Purchasing Managers’ Index rose to 53.0 in June from 52.9 in May, with respondents indicating increases in production and employment within the sector.

Despite the recent uptick, the loonie endured a sharp monthly loss in June, falling 2.8% over the month - its largest monthly decline since October 2024.


Taken together, the combination of softer US labor-market signals, modest improvement in Canadian manufacturing metrics, and a small rise in oil prices helped push the Canadian dollar to its best level in 10 days versus the US dollar on Thursday.

Risks

  • Further revisions to US payrolls or subsequent US employment reports could alter market expectations about Federal Reserve policy and reverse currency moves - this affects financial markets and interest-rate-sensitive sectors.
  • Volatility in oil prices may change the outlook for the Canadian dollar given Canada’s exposure to energy exports - this impacts the energy sector and broader FX flows.
  • Continued large monthly swings in the loonie, such as the 2.8% decline seen in June, underscore persistent volatility that can affect trade-exposed industries and importers/exporters.

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