06/01/26

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The USD/CAD currency pair has exhibited limited movement in recent sessions, trading around 1.3760 amid subdued market activity. Both the US dollar and Canadian dollar are experiencing relatively stable trading conditions, reflecting a landscape where geopolitical concerns are temporarily easing.

Recent geopolitical developments, including a significant US military strike against Venezuela, have initially heightened tension but seem to have a muted impact on the currency markets. The US has alleged the detention and removal of Venezuelan President Nicolas Maduro, adding a layer of uncertainty to the political situation. However, markets appear to have largely dismissed these headlines, focusing instead on broader economic indicators and upcoming data releases.

In the economic sphere, the US ISM Manufacturing Purchasing Managers’ Index declined for the third consecutive month, falling to 47.9 in December 2025. This contraction signals a slowdown in manufacturing activity, driven by declines in production and inventories. The employment component showed slight improvement, but overall, the data point towards a cautious outlook for the industrial sector. Traders are preparing for upcoming economic reports, including the highly anticipated Nonfarm Payrolls figures, which are expected to show a modest increase of around 55,000 jobs. These figures are critical for gauging the Federal Reserve’s future monetary policy stance.

The Canadian dollar’s performance remains closely tied to oil prices and US economic prospects. Renewed US and international access to Venezuelan crude supplies may exert downward pressure on oil prices, which could negatively impact Canada’s economy given its dependence on oil exports. Furthermore, a softer global oil outlook into 2026, characterized by ample supply and subdued demand, is likely to limit any significant gains for the Canadian dollar.

Overall, currency movements are influenced by a combination of interest rate expectations set by the Bank of Canada, oil prices, inflation data, and macroeconomic indicators. While higher oil prices and tight monetary policy generally support a stronger Canadian dollar, ongoing geopolitical developments and global economic conditions continue to introduce an element of uncertainty into the exchange rate trajectory.