The Canadian dollar closed out its worst week in nearly a year, settling at 1.3895 against the U.S. dollar as two distinct pressures converged: a domestic labor market that added fewer jobs than hoped and a geopolitical shadow cast by Venezuelan oil potentially displacing Canadian heavy crude in American refineries. These forces did not arrive alone — they were amplified by a resilient U.S. jobs report that dimmed hopes for Federal Reserve rate cuts, making the American dollar more attractive to global investors. The loonie now sits at a crossroads familiar to resource-dependent economies, whe
Canadian dollar posts biggest weekly drop in 11 months amid weak jobs data
longer-term structural risk for Canada's heavy oil export markets
Mark
Why did the Canadian dollar fall so sharply this week when the job numbers weren't actually that bad?
Mimi
Because currency markets don't live in isolation. Yes, Canada added jobs, but the unemployment rate rose anyway—that's a sign people are giving up on finding work or entering the market. Meanwhile, the U.S. jobs report was strong, which killed expectations for Fed rate cuts. A stronger U.S. economy and higher U.S. rates make the dollar more attractive.
Mark
And the Venezuela angle—is that really moving markets, or is it just noise?
Mimi
It's real structural risk, not noise. Canadian heavy oil competes directly with Venezuelan crude. If Venezuela can suddenly export more to the U.S., Canadian producers lose a buyer. That's not a one-week story; that's a threat to long-term revenues and market share.
Mark
So the loonie could keep falling?
Mimi
It depends on whether U.S. rates stay higher for longer and whether Venezuelan supply actually materializes. If both happen, yes. The currency is caught between a cooling Canadian economy and a resilient American one.
Mark
What would stop the decline?
Mimi
A surprise in Canadian employment that's genuinely strong, or a reversal in Fed rate expectations. Or if Venezuelan geopolitical risk fades. Right now, none of those are happening.
The Pulse
- Canada's December job creation came in at just 8,200 positions — well below expectations — while unemployment climbed to 6.8%, signaling a labor market losing momentum heading into the new year.
- Venezuelan political instability is threatening to redirect heavy oil flows into U.S. markets, putting Canadian crude in direct competition for the same refinery customers it has long relied upon.
- A stronger-than-expected U.S. employment report reduced the likelihood of a Federal Reserve rate cut in January, reinforcing dollar strength and pulling capital away from the Canadian currency.
- Oil prices rose 2.7% to $59.31 a barrel on supply disruption fears, yet the geopolitical threat to Canada's market share overshadowed any revenue benefit that higher crude prices might have offered.
- The loonie is now down 1.2% for the week — its steepest weekly decline since February 2025 — with Canadian bond yields also easing, suggesting markets are pricing in a softer economic road ahead.
The Canadian dollar closed out its worst week in nearly a year, settling at 1.3895 against the U.S. dollar as two distinct pressures converged: a domestic labor market that added fewer jobs than hoped and a geopolitical shadow cast by Venezuelan oil potentially displacing Canadian heavy crude in American refineries. These forces did not arrive alone — they were amplified by a resilient U.S. jobs report that dimmed hopes for Federal Reserve rate cuts, making the American dollar more attractive to global investors. The loonie now sits at a crossroads familiar to resource-dependent economies, where the fate of a currency is bound not only to what a nation produces, but to the shifting politics of who else produces the same thing.
The Canadian dollar endured its worst weekly performance in nearly a year on Friday, falling to 1.3895 U.S. dollars — roughly 72 American cents — as traders processed a convergence of discouraging signals from both sides of the border.
On the domestic front, Canada's labor market disappointed in December, adding only 8,200 jobs after months of stronger hiring. Unemployment rose to 6.8% as more workers entered the job search, exceeding the 6.6% analysts had anticipated. The numbers weren't disastrous, but they weren't reassuring either — a mixed report that left markets largely unmoved on Canada's near-term outlook.
The more structurally troubling pressure came from geopolitics. Venezuela's ongoing instability raised the prospect of increased Venezuelan oil reaching U.S. refineries — the same market that absorbs Canadian heavy crude. RBC Capital Markets' chief technical strategist George Davis flagged this as a "longer-term structural risk," warning that Canadian energy exporters could lose critical market access if Venezuelan supply becomes more reliably available to American buyers.
Meanwhile, a robust U.S. jobs report shifted the calculus for Federal Reserve policy, reducing expectations for a January rate cut and strengthening the U.S. dollar broadly. Even a 2.7% rise in oil prices to $59.31 a barrel — driven by concerns over Iranian supply disruptions and Venezuelan uncertainty — failed to lift the loonie, as the threat to Canadian market share outweighed the benefit of higher crude revenues. Canadian 10-year bond yields dipped slightly, reflecting a market quietly preparing for softer conditions ahead.
The question now facing Canadian investors and exporters is whether the loonie's slide represents a temporary correction or the early stages of a more prolonged retreat.
The Canadian dollar took its heaviest weekly beating in nearly a year on Friday, sliding to levels not seen since early December as traders absorbed a tangle of bad news from north and south of the border. By day's end, the loonie was worth 1.3895 U.S. dollars—or roughly 72 cents in American money—down 0.2% on the day and headed for a 1.2% weekly loss, the worst performance since February 2025.
Two forces were pushing the currency lower. The first was domestic: Canada's job market stumbled in December, adding only 8,200 positions after three months of robust hiring. The unemployment rate ticked up to 6.8% as more people entered the workforce looking for work. Analysts had braced for job losses and expected the rate to climb only to 6.6%, so the actual numbers landed somewhere between relief and disappointment—not catastrophic, but not encouraging either.
The second force was geopolitical and structural. Venezuela's political upheaval and the prospect of increased Venezuelan oil flowing into U.S. markets posed a longer-term threat to Canadian energy exports. Canada sells heavy crude, the kind that competes directly with Venezuelan oil. If Venezuelan supply becomes more available to American refineries, Canadian producers lose a crucial market outlet. George Davis, chief technical strategist at RBC Capital Markets, noted that this geopolitical risk had weighed on the loonie throughout the week, creating what he called "longer-term structural risk" for Canada's heavy oil sector.
The employment report itself was mixed enough that it didn't decisively move the needle. Stronger-than-expected job creation was offset by the rise in unemployment, leaving traders neutral on Canada's labor market. But the U.S. employment picture told a different story. American job data came in stronger than feared, which meant the Federal Reserve was less likely to cut interest rates in January. A stronger U.S. economy and higher U.S. rates make the dollar more attractive to investors holding multiple currencies. The broader U.S. dollar index gained ground against a basket of major currencies.
Oil prices themselves rose 2.7% to $59.31 a barrel, buoyed by concerns about potential disruption to Iranian output and the Venezuelan supply uncertainty. Yet this bump in crude prices offered little comfort to the Canadian currency. The geopolitical risk to Canadian market share outweighed the benefit of higher oil revenues. Canadian bond yields eased slightly across the curve, with the 10-year dropping 1.7 basis points to 3.385%, a sign that traders were pricing in softer economic conditions ahead.
The loonie's weakness reflects a currency caught between competing pressures: a labor market that is cooling but not collapsing, a geopolitical threat to a key export sector, and a U.S. dollar that is strengthening on the back of resilient American employment and the prospect of higher interest rates for longer. For Canadian exporters and investors, the question now is whether this is a temporary dip or the beginning of a longer slide.
Notable Quotes
Geopolitical events in Venezuela have been weighing on the Canadian dollar as U.S. control of their energy sector will present longer-term structural risk for Canada's heavy oil export markets— George Davis, chief technical strategist at RBC Capital Markets
With the U.S. employment report failing to show a pronounced slowdown, the odds of a Fed cut in January slumped, lending broader-based support to the USD— George Davis, RBC Capital Markets
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