Loonie Slides as Oil Prices Weigh on CAD

The Canadian dollar is currently trading near its one-week low, due to weak oil prices offsetting the impact of a softer U.S. dollar. The currency pair USD/CAD is hovering around 1.3650.

Oil prices have been declining, with West Texas Intermediate (WTI) crude falling below $78 per barrel. This drop in oil prices reduces Canada's terms of trade and makes the Canadian dollar less attractive to foreign investors.

The correlation between oil and CAD has been a consistent theme in 2025, and the current weakness in crude is countering any gains the currency might have derived from a softer U.S. dollar. The U.S. dollar index (DXY) has retreated from recent highs as market participants reassess the Federal Reserve's policy path.

The Canadian economy is closely tied to commodity exports, and oil prices are a key driver of the loonie's valuation. A weaker loonie can translate into higher import costs for Canadian businesses and consumers, potentially feeding into inflation.