The Canadian dollar was braced for a beating in 2025—until Mark Carney’s election changed the game. Tomorrow talks take place between Carney and Trump as the Canadian dollars performance seems stable since March.
Loonie’s Election Bounce: Carney’s Win Lifts CAD
On February 3, the Canadian dollar was $0.68 against the dollar, a low not seen since 2003. By early May, it had risen to $0.72 — a 6.42% jump. This is better than ING’s worst-case prediction of $0.66 which was suggested should the trade conflict escalate. This also aligns closely with the Royal Bank of Canada’s forecast of $0.71 by year-end. Despite U.S. tariffs and slumping oil prices, which usually drag the CAD down, it has shown grit. The recent election of Mark Carney is only part of the reason behind this.
CAD’s Grit Shines: A 6.42% Rally Against Odds
From March to May 2025, a flurry of developments rocked the value of the Canadian Dollar.
On March 4, President Trump slapped 25% tariffs on Canadian goods, rattling markets. Some USMCA-compliant products got a reprieve until April 2. Canada fired back with its own tariffs, and talks continue, as The New York Times reported. With 75.9% and 62.2% of Canada’s exports and imports, respectively, tied to the U.S. in 2024, this trade war could have led to a further decline in the value of the Canadian dollar, however, it bucked the trend.
In response to tariffs,the Bank of Canada sliced its rate to 2.75% on March 12, and held steady in April, citing trade risks. Across the border, the U.S. Federal Reserve kept rates at 4.25%-4.50% in March, eyeing cuts later in 2025, according to CNBC. A wider rate gap usually weakens the Canadian dollar, but whispers of U.S. cuts may have given it a lift.
Amid this, oil prices took a dive. Canada’s oil exports took a hit as Brent crude fell to $66 per barrel in April, down from $76 in January, driven by U.S. tariffs and OPEC+ boosting output, according to IEA. Lower oil prices often dent the price of the Canadian dollar, but its rise suggests there are other reasons to consider.
Source: IEA
March 2025 saw Canada’s unemployment increase to 6.7%, with 33,000 jobs lost — the first drop since January 2022, according to Statistics Canada. Wage growth dropped to 3.5% from 4%, hinting at trade-related strain. These red flags could’ve spooked investors, but as the CAD stabilized this suggests confidence in Canada’s ability to weather the storm.
Trade Wars and Oil Slumps: What’s Driving the Loonie?
The CAD’s 6.42% climb from February to May is a big story for the Canadian economy.
One is market optimism. Investors may see U.S. rate cuts as positive for the performance of the CAD, as Morningstar hints. Policy hopes are another contributing factor. Canada’s potential counter-moves, like fiscal aid or further rate reductions, might boost confidence, according to the Bank of Canada.
Additionally, signs of the U.S. economic cooling, noted by J.P. Morgan, could be capping USD strength, helping the CAD. Some believe this might be tied to the 2025 Canadian federal election, which took place on April 28 following the resignation of Trudeau in March. Some reports cite that Carney’s victory was tied to the confidence of his supporters in his ability to match Trump’s tariff better than Trudeau could.
Behind the Rally: Markets Bet on Carney and Fed Cuts
To explain in more depth the performance of the Canadian dollar, we looked at key economic indicators for Canada and the US.
| Indicator | Canada (2025) | U.S. (2025) | Notes |
| CAD to USD Rate | 0.68 (Feb 3) to 0.72 (May 4) | – | A 6.42% jump despite trade and oil challenges |
| Unemployment Rate | 6.6% (Feb), 6.7% (Mar) | 4% (Jan) | Canada’s job market took a hit with trade uncertainty; the U.S. looks steadier. |
| Interest Rate | 3% (Jan), 2.75% (held on April 16) | 4.25%-4.50% (steady) | A 150 basis point gap puts pressure on the CAD, but the U.S. rate cut hopes to help. |
| Inflation Rate | Below 2% (est.), 2.8% (Mar CPI) | 3% | Canada’s inflation fits the BoC’s 1-3% goal; the U.S. is a bit higher. |
| GDP Growth (Q1 Flash) | +0.2% q/q | – | Canada’s growth is sluggish — tariffs might be starting to bite. |
| GDP per Capita (end 2023) | $53,400 | $82,700 | The U.S. is way ahead here, showing the economic size difference. |
| Government Debt as % of GDP | Debt $1.5T, GDP $2.2T (68.2%) | Debt $36T, GDP $29.1T (123.7%) | The U.S. has a heavier debt load, which might hold back the USD’s rise. |
Note: Some Canada inflation data estimated; May unemployment data for Canada unavailable as of May 4, 2025.
This table above lays out critical economic indicators for Canada and the U.S., alongside the CAD’s performance from February to May 2025. It is a snapshot that can help explain why the Canadian dollar has stabilized amid global turbulence.
Canada’s rising unemployment at 6.7% and sluggish GDP growth of 0.2% signal trade-related struggles, giving context to why the CAD’s performance is so promising.
Carney vs. Trump: Can Talks Save the Loonie?
This week Carney is meeting with Trump and senior U.S. officials. He will discuss the tariffs and future collaboration. The price of a barrel of oil continues to drop, today it is less than $60 a barrel, one of Canada’s biggest exports.
Carney is a seasoned statesman, having led the Bank of England as Governor from 2013 to 2020. Importantly, he has been strong in his approach to Trump’s tariffs, and he will likely try to press the U.S. President his politics towards Canada. Both the USD’s and the CAD’s performance are being affected by the current trade war.
Warren Buffett was quoted as saying that “trade should not be a weapon” in a meeting with shareholders over the weekend.
Carney’s experience is an asset, but with Trump’s unpredictable tariff stance, can he secure a deal?
Author: Richardson Chinonyerem
#CADUSD #Loonie #Carney #Trump #Tariffs #CanadaElection2025 #CanadianDollar
The editorial team at #DisruptionBanking has taken all precautions to ensure that no persons or organizations have been adversely affected or offered any sort of financial advice in this article. This article is most definitely not financial advice.
See Also:
How Strong Will the Canadian Dollar Be in 2025? | Disruption Banking
Will Trump’s Liberation Day Cause a Stock Market Crash? | Disruption Banking
