Boosted by a surprising trade surplus, the Canadian dollar reached a near three-month high on Thursday. This comes in the wake of the greenback’s broad-based declines and Canada’s robust international trade data, which illustrates that the domestic economy has weathered the initial impact of the trade war.

Loonie Strengthens Amid US Dollar Decline

The Canadian dollar, colloquially known as the loonie, was trading 0.2% higher at 1.3765 per U.S. dollar, equivalent to 72.65 U.S. cents. Earlier in the day, it had reached its strongest intraday level since September 17 at 1.3757. This surge in the loonie’s strength is notable considering Canada reported a monthly trade surplus of C$153 million (US$110.92 million) in September, effectively reversing a seven-month trend of deficits. Economists had previously predicted a C$4.5 billion deficit.

Trade War Impact: What’s Ahead?

According to Marc Ercolao, an economist at TD Economics, while the progress may not be linear, it’s plausible that the most severe effects of the tariffs are now in the past. The major concern going forward is how the trade dynamics will evolve as the U.S., Canada, and Mexico gear up for a complex USMCA review.

USMCA Review and Its Implications

The United States-Mexico-Canada Agreement, which has largely protected Canada’s exports from U.S. tariffs, is due for a joint review in 2026. Bank of Canada Governor Tiff Macklem opined on Wednesday that the economy has demonstrated overall resilience to the impact of U.S. trade measures. This was stated as the Canadian central bank decided to keep its benchmark interest rate unchanged at 2.25%.

Impact on the Loonie and Oil Prices

Strategists at Monex Europe noted that the Bank of Canada’s steady stance should continue to bolster the loonie, even as the U.S. dollar softens. The U.S. dollar fell against a group of major currencies after the Federal Reserve slashed interest rates on Wednesday and presented a less hawkish outlook than some had anticipated.

Meanwhile, the price of oil, one of Canada’s key exports, was trading 1.8% lower at $57.41 a barrel. This decrease is primarily due to investors’ focus on the peace talks between Russia and Ukraine.

Canadian Bond Yields and the Market

Canadian bond yields saw minor declines across the board, mirroring movements in U.S. Treasuries. The 10-year yield was down by 1.2 basis points at 3.411%, while the gap between it and its U.S. equivalent narrowed by 3.2 basis points to about 71 basis points in favor of the U.S. note. This is the narrowest this gap has been since September 2024.

Ethan Radcliffe

Ethan Radcliffe is a senior reporter and digital editor at The Toronto Insider, specializing in Canadian federal policy, GTA urban development, and national economic trends. With over a decade of experience in North American journalism, Ethan focuses on translating complex legislative and economic developments into clear, accessible reporting for Canadian readers. Ethan’s work emphasizes policy analysis, government accountability, and data-driven reporting, with a strong focus on how federal and provincial decisions impact communities across the Greater Toronto Area and beyond. He has covered infrastructure planning, housing policy, fiscal strategy, and regulatory changes affecting Canadian households and businesses. A graduate of Toronto Metropolitan University’s School of Journalism, Ethan brings expertise in investigative reporting, long-form analysis, editorial standards, and digital publishing best practices. His reporting is guided by verifiable sources, public records, and transparent sourcing. In addition to reporting, Ethan has experience in newsroom editing, fact-checking workflows, SEO-informed journalism, and audience analytics, ensuring stories meet both editorial integrity standards and modern digital discoverability requirements. Ethan is committed to objective, fact-driven journalism and adheres to established ethical guidelines, prioritizing accuracy, clarity, and public trust in all reporting.

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