The Loonie’s Slide Traces to Ottawa and Washington, Not Tehran
West Texas Intermediate has fallen nearly six per cent since its August 21 close of $87.06, easing to $81.85 on Thursday as reports that Iran and Oman are negotiating a temporary joint maritime corridor through the Strait of Hormuz took the edge off the war premium that has defined oil pricing since February. That decline is real, it is sourced, and on any other week it would be the whole Geopolitical Desk story.
It is not, this week, the story behind the Canadian dollar. USD/CAD has climbed from 1.3764 on August 21, the pair’s three-month low for the greenback, to 1.3856 on Thursday, a move that runs almost exactly opposite to what a six per cent oil decline should produce in a petro-currency. The same six trading days carried Canada’s retaliatory tariffs on roughly $20 billion of annual US imports and Washington’s confirmation that duties on Canadian autos, trucks, parts and steel rise to 50 per cent on January 1, 2027. Trading Economics attributed the loonie’s move explicitly to the deteriorating trade outlook, not to energy.
The mechanism tying the two desks together: Bank of Canada rate hike odds have fallen this week specifically on tariff related growth risk, even as elevated energy costs would normally argue the opposite direction for policy. A currency move usually explained by oil is, this week, a trade war signal wearing an energy costume.
WTI has slid nearly six per cent from its August 21 peak of $87.06 to Thursday’s $81.85 close, a retreat that lines up with easing signals out of the Strait of Hormuz rather than with any resolution of the trade dispute weighing on the loonie.
WTI crude has fallen nearly six per cent from its August 21 close as reports of Iran-Oman talks on a temporary Strait of Hormuz maritime corridor eased supply concern. Source: Investing.com futures data.
USD/CAD has climbed back most of the way toward its August high over the same six trading days that WTI fell nearly six per cent in the opposite direction, a divergence in magnitude that the currency’s usual energy correlation does not explain on its own.
USD/CAD has risen roughly six-tenths of one per cent since the August 21 three-month low for the pair, a period spanning Canada’s retaliatory tariff announcement and Washington’s confirmation of higher 2027 duties on Canadian autos and steel. Source: MTFX Group, Bank of Canada indicative data.
Two Stories Landed on the Same Gold Trade This Week, and Neither Explains the Miners’ Losses Alone
Agnico Eagle, Barrick and Wheaton Precious Metals lost between 3.6 and 4.4 per cent this week as gold slipped on Wednesday’s hot US Personal Consumption Expenditures report, which printed at 3.7 per cent year over year against a 3.6 per cent consensus. CME Group’s FedWatch tool cut the odds of a September Federal Reserve rate cut to roughly 22 per cent from 28 per cent within hours of the release. That is a rates story, and Market Desk read it correctly.
It is only half the story. The same days that took the edge off the Strait of Hormuz war premium in oil took a comparable edge off gold’s safe haven bid, because the two commodities have been pricing overlapping tail risk since the Hormuz crisis began in February. National Bank of Canada’s 4.2 per cent decline to $213.18, following an otherwise solid third quarter profit beat, shows a market that sold first and read the earnings second, consistent with a broader de-risking move rather than a company specific verdict.
The miners fell harder than the PCE reading alone would predict because two desks’ frameworks, rates and geopolitics, landed on the same trade in the same week. Neither the Economy Desk’s inflation read nor the Geopolitical Desk’s Hormuz read fully explains Thursday’s mining board on its own.
Friday’s Jackson Hole Remarks Are the Next Catalyst for Both Threads at Once
Kevin Warsh speaks at the Kansas City Fed’s Jackson Hole symposium on Friday, and the timing matters more than usual. Markets have just repriced September rate cut odds down to 22 per cent on one inflation print, gold and the mining names that track it have absorbed that repricing plus a fading geopolitical premium, and the loonie has spent the week trading on a tariff story that has nothing to do with either. A Warsh appearance leaning toward higher-for-longer policy reinforces Thursday’s gold and rate read without touching the trade story at all. A Warsh appearance leaning dovish reopens the rate cut debate the PCE print just closed and could pull gold back toward its safe haven bid independent of what happens next in Hormuz talks. Either way, Friday’s remarks reprice one thread and leave the other, the trade war now driving CAD, untouched.