Canadian Dollar Slumps as Fed Uncertainty Grips Markets

The Canadian dollar is struggling to find support as it edges lower despite a pause in the Treasury sell-off. The US 10-year yield has retreated from yesterday's multi-year peak and is now around 5.23%, allowing the CAD/US 10-year yield spread to claw back a little ground.

Fed officials have provided mixed signals ahead of today's employment report, with policymakers offering sharply different views on where rates should go next. Dallas Fed President Lori Logan argued that another 50bps or more of tightening may be required, while Minneapolis Fed President Neel Kashkari expects one additional hike this year and another in 2027.

The market is now waiting to see which Fed camp matters most when the NFP numbers arrive. Forecasts call for 90,000 jobs, down from August's 162,000, with unemployment expected to remain at 4.1%.