The Canadian Dollar (CAD) rebounded on Monday, paring earlier daily losses as the US Dollar (USD) retreated from multi-month highs against most major currencies. The USD/CAD pair traded around the 1.4240 level at the opening of the US session, after reaching an intraday high of 1.4293, the highest since March 2025, before turning flat on the daily chart [1].
Global bond market turmoil has been a key driver of currency movements, with rising borrowing costs in France sparking fears of contagion among other EU members and recalling concerns from the 2009 credit crisis. This environment has supported the US Dollar, especially amid weakness in the EUR/USD pair. However, the negative impact of Friday's disappointing US Nonfarm Payrolls report has diminished expectations for consecutive interest rate hikes by the US Federal Reserve after the October 27-28 meeting [1].
Market attention is now focused on the upcoming US ISM Services Purchasing Managers’ Index (PMI) report, scheduled for release at 14:00 GMT. The consensus expects the headline figure to show a moderation in September's business activity, with the index forecast to decline to 55 from 55.4 in August. Additionally, investors are watching the Final S&P Services PMI, with preliminary data indicating a surge to 58.7 in September, the strongest reading in over five years, up from 56.5 in August [1].
In Canada, the economic calendar is quiet on Monday, with investors awaiting Tuesday's Ivey PMI and Friday's employment report for further insights into the country's economic outlook. The CAD has depreciated more than 3% over the past four weeks, largely due to the US Federal Reserve's hawkish stance, which has widened the monetary policy divergence with the Bank of Canada (BoC). The BoC has maintained its benchmark interest rate at 2.25% for a year and is not expected to raise rates soon, given persistent inflation above the 2% target, a softer labor market, and ongoing economic uncertainty related to the US-Canada trade relationship [1].
CONCLUSION
The Canadian Dollar's recovery reflects shifting sentiment as the US Dollar loses momentum ahead of key US services sector data. Persistent monetary policy divergence and global bond market volatility continue to weigh on the CAD, with upcoming Canadian economic releases likely to influence future moves.