Loonie steadies after longest rally since 2022

The Canadian dollar was little changed against its US counterpart on Monday, consolidating after seven consecutive sessions of gains that formed its longest daily winning streak since March 2022. The loonie traded near 1.4010 per US dollar, or 71.38 US cents, with intraday moves constrained ahead of major central bank decisions later in the week.

Trading on Monday saw the currency move in a relatively tight band. The US dollar–Canadian dollar pair moved in a range of 1.3999 to 1.4055. The range underscored a steadier tone after recent sharp gains.

The period leading into Monday’s consolidation was marked by solid appreciation in the Canadian dollar. On Friday, the loonie touched its strongest intraday level since September 16, with trades around 1.3966 to 1.3969 per US dollar. That placed the currency at a five‑ to six‑week high against the greenback.

The advance left the Canadian dollar on track for a seventh straight day of gains and a weekly rise of about 1%, its biggest weekly advance since April.

Speculative positioning has shifted alongside the currency’s climb. Data from the US Commodity Futures Trading Commission showed non‑commercial net short positions in the Canadian dollar falling to 74,709 contracts as of October 20, down from 94,765 a week earlier, indicating reduced bearish bets.

Market participants pointed to changing expectations for both the Federal Reserve and the Bank of Canada as an important driver of the loonie’s recent strength. One strategist said the Canadian dollar had strengthened meaningfully over recent sessions, citing a shift in interest rate assumptions as a key factor shaping the US dollar–Canadian dollar pair.

Attention now centers on interest rate announcements due Wednesday from the Bank of Canada and the Federal Reserve. Traders anticipate that the two central banks could take different policy paths, with a 25‑basis‑point hike expected from the Canadian central bank while the US central bank is seen holding rates steady after its last increase.

The Canadian central bank is also scheduled to release its quarterly Monetary Policy Report, which will include updated projections for growth and inflation. Policymakers’ comments will be monitored for signals on the possible pace and timing of any further policy moves, given that financial markets already price in a Bank of Canada hike and a Federal Reserve pause.

Oil, one of Canada’s major exports, slipped on Monday on hopes of easing geopolitical tensions, muting a traditional source of support for the Canadian dollar. The softer commodity backdrop came just as the currency was digesting its latest rally and investors were trimming positions ahead of policy decisions.

Analysts have noted that the Bank of Canada’s stance could offer some near‑term support to the loonie compared with other major currencies, as markets expect less tightening from some of Canada’s peers. With the Canadian dollar now hovering just above 1.40 per US dollar, upcoming central bank guidance and key economic data releases are set to determine whether the recent winning streak extends or gives way to further consolidation.