October began with the US government shutting down and as of November 5, the situation has not changed. FX and equity markets exhibited heightened volatility due to US corporate quarterly earnings reports and the run-up to the highly anticipated President Trump and Xi Jinping meeting in Busan, South Korea.
The meeting ended on a somewhat positive note with Trump lowering his fentanyl-inspired tariffs and China agreeing to reduce barriers to rare earth export permits.
Trump singled out Canada for an additional 10% tariff because Ontario Premier Doug Ford used a speech by former President Ronald Reagan, who expressed his disdain for tariffs, in a $75 million ad campaign targeting Republican districts across America. The Trumpster was embarrassed.
US equity markets posted record highs fueled by tech company earnings and AI investments.
November begins with continued uncertainty as the government shutdown continues to curtail the release of key economic data, leaving market participants to rely more heavily on corporate earnings and private data sources for signals.
The USD and Federal Reserve
The US dollar has started November with broad-based demand stemming from rising Treasury yields and concern about an equity market correction. The 10-year Treasury yield, which sat at 3.93% on October 22, has risen steadily, reaching 4.11% on November 5.
Traders continue to digest the results of the October 29 FOMC meeting. The Fed cut rates by 25 bps, but the decision was not unanimous. Governor Stephen Miran voted for a 50 bps cut, while Kansas City Fed President Jeffrey Schmid preferred to leave rates unchanged. Fed Chair Powell further roiled markets when he said that “a December rate cut is not a done deal. Far from it.” Traders are still betting on a December cut, but the odds have dropped from 91% in October to 68% on November 5. The November 5 ADP employment data was weak but better than the September data and still points to a cooling labour market. (ADP actual -32,000 vs forecast 50,000).
The US dollar index (DXY) was mixed in the first half of October, then it started to climb steadily and continued to do so into November.
The Canadian Dollar and Bank of Canada
The Bank of Canada (BoC) cut its benchmark rate to 2.50% on September 17, which was expected. Governor Tiff Macklem’s opening statement at his post-meeting press conference was rather downbeat. He admitted US tariffs and trade uncertainty had weakened the Canadian economy and were putting upward pressure on inflation. The BoC expects GDP growth to remain weak for the second half of 2025.
The BoC statement was followed by the federal budget released on November 4. The government pointed out that “the cost of living is high, unemployment is up, and business uncertainty is delaying investment while global economic growth has slowed. That is not a recipe for prosperity.”
The Canadian dollar is suffering the consequences and has dropped to levels last seen in April, although the bulk of the weakness stems from safe-haven demand for the US dollar in the event of a prolonged equity market correction.
Oil Prices
WTI oil dropped steadily in October, falling from $62.82 to a low of $56.00 after the International Energy Agency and OPEC predicted an oil supply glut in the last quarter of this year and into the first half of 2026. That glut didn’t stop OPEC from announcing a production increase for December, but they kept it to just 137,000 barrels per day. Prices have climbed in the week preceding the Trump/Jinping meeting but will remain under pressure while they are below $62.00.
Sources: Bloomberg, Investing.com, Reuters
Bank 2025-USD/CAD Q4 2026-USD/CAD Q1
Scotiabank* 1.3400 1.3300
BMO 1.3900 1.3700
CIBC 1.3600 1.3600
TD Bank* 1.3800 1.3700
National Bank 1.3900 1.3700
*Forecast is based on last month. Forecast Table is for mid-market rates, and subject to change anytime.
