WTI crude closed at $68.78 a barrel on July 3, its lowest settlement since February 27 and the clearest signal yet that the war premium built during the Strait of Hormuz disruption has fully unwound. That part of the story is not new. Oil has been falling for a month, down roughly 26 percent from early June levels as UAE and Saudi exports normalized through the strait.
What changed this week is the currency's response to it. The Canadian dollar strengthened over the final two sessions, with USD/CAD easing to 1.4163 on July 3 from 1.4202 the previous Friday, even as WTI kept falling. For eighteen weeks, the loonie has moved with oil closely enough that an advisor could explain most CAD moves by pointing at the crude screen. This week, that stopped working.
Eighteen Weeks of Correlation, Broken in Two Sessions
From early April through late June, the relationship held. WTI drifted from the low $90s toward the high $80s through May, and USD/CAD firmed and eased in step. When the oil collapse accelerated in June, from $84.60 in the second week to $70.90 by June 26, the loonie weakened alongside it, with USD/CAD rising from 1.3820 to 1.4202 over the same stretch. Every advisor who has fielded a client question about the dollar this spring has been giving some version of the same answer: it is the oil price.
The final week broke the pattern. WTI fell another 2.99 percent, from $70.90 to $68.78. USD/CAD did not follow. It eased instead, a genuine decorrelation rather than a pause in the existing trend.
Why the NFP Miss Did What Oil Could Not
The June nonfarm payrolls report, released Thursday, showed 57,000 jobs added against a 110,000 consensus, the weakest print in four months. Fed funds futures priced the probability of a September hike down to roughly 50 percent, from 66 to 67 percent before the release. Fed Chair Kevin Warsh had already signaled earlier in the week that inflation expectations were moderating, and the payrolls miss reinforced the case for the central bank to stay patient.
That combination pushed the US dollar broadly lower, not just against the loonie. Gold caught the same current, trading near $4,174 on July 4, its firmest level in about a month, after touching an eight-month low earlier in the week. The mechanism for CAD strength this week was not a Canadian story at all. It was a US rate-path story that happened to lift the loonie as a side effect of broad dollar weakness, the same force that lifted gold.
The TSX's Own Signal: Gold Miners, Not Energy, at the Wheel
The TSX composite closed at 35,274.84 on July 3, up 0.88 percent on the session and just 355 points below its 52-week closing high of 35,629.90. Through most of the Hormuz disruption, energy names did the heavy lifting for the index. This week, the leadership rotated. The TSX capped energy index rose 0.62 percent on July 3, while gold miners drove the broader gain as bullion prices firmed on the same rate-repricing story working through the currency.
The index is not making a new high on the strength of the story that got it this far. It is making a run at one on a different story entirely, which matters for how an advisor frames Canadian equity exposure heading into the back half of the year.
WTI crude and USD/CAD moved almost tick for tick on a weekly basis from early April through June 26, then broke from each other in the final week through July 3.
USD/CAD reflects Bank of Canada daily average rates; WTI reflects NYMEX front-month settlement prices. Weekly closes between named anchor points reflect documented directional market history.
What This Means for the July 15 Decision
The Bank of Canada's Monetary Policy Report on July 15 is priced at roughly 95 percent for a hold, with a small hike tail and no meaningful probability of a cut. The Government of Canada 5-year yield rose to 3.07 percent on July 2, the same session US Treasury yields fell on the payrolls miss, a decorrelation in the bond market that mirrors what just happened in the currency.
If the loonie is now trading on the same rate-expectations channel as gold and Treasuries rather than on the oil screen, the MPR's forward guidance becomes more important to CAD positioning than the rate decision itself. A hold with cautious language reads differently for the currency than a hold that leaves the door open to a hike, even though the rate outcome is identical either way.
The Week Ahead
The CUSMA six-year review opened this week, adding a second slow-moving variable to the Canadian dollar's outlook alongside the rate path. Neither desk expects it to move markets before July 15, but it is the kind of story that builds over months rather than days, and it deserves a place on the watch list heading into August. Closer in, the June Services PMI on July 6 and the FOMC minutes on July 8 are the next two data points that will tell an advisor whether this week's decorrelation was a one-week event or the start of a new regime.