The Canadian dollar has weakened against the U.S. dollar in 19 of the last 20 sessions, and a 3.8% jump in Brent today left USD/CAD at 1.4220, unchanged from 1.4212 at the Tuesday close.
The Bank of Canada daily rate for USD/CAD rose from 1.3784 on September 8 to 1.4257 on October 7, a 3.4% gain for the U.S. dollar and a 3.3% decline for the Canadian dollar. The largest single-day move was 0.39%, on October 1. Brent has moved more than 3% in six sessions over that span, including today, and the currency has not followed any of them. HDQ calculated a daily correlation of 0.10 between USD/CAD and WTI and negative 0.01 with Brent across those 20 changes, using the Bank of Canada rate against futures closes, so the measure is approximate.
The Loonie Is Following the Rate Gap, Not Brent
The Federal Reserve raised its target range by a quarter point on September 16, while the Bank of Canada has held at 2.25%. USD/CAD has risen 2.2% since that day, from 1.3947 to 1.4257. Reuters reported on October 7 that investors price at least one 25 basis point Bank of Canada hike by year-end, according to LSEG data, which leaves Canada tightening later than the United States.
USD/CAD rose from 1.3784 to 1.4257 over 20 sessions with no daily move above 0.39%, across a stretch in which Brent swung 6.3% in a single day.
The Bank of Canada publishes USD/CAD as a daily rate rather than a market close. The Federal Reserve raised its target range on September 16, and Brent futures closed 6.3% higher on September 10 (Yahoo Finance).
The September Labour Force Survey at 8:30 AM ET on Friday is the next release that can move the rate gap, ahead of the October 19 CPI and the October 28 Bank of Canada decision.
Currency Adds 3.4 Points to the Equity Gap
An unhedged Canadian holder of the S&P 500 has gained 5.2% since September 8, while the TSX has lost 3.0%. In U.S. dollars the S&P 500 rose 1.7% between the September 8 and October 7 closes. The other 3.4 points of the unhedged return came from the exchange rate alone.
Today narrowed the local-currency gap. At 3:53 PM ET the TSX was up 0.25% at 35,130.61, the S&P 500 was down 0.53% at 7,760.53, and the Nasdaq Composite was down 1.3% at 27,182.13 after chip stocks fell on a Financial Times report that OpenAI annualized revenue is running $20 billion below earlier estimates, according to Yahoo Finance.
The Behavioural desk showed this morning that the U.S. 30-year yield climbed 38 basis points over eleven sessions with no day above 10 basis points, a loss that registers late. The currency component has the same shape over a longer span: 19 gains in 20 sessions, none larger than 0.39%. Performance comparisons of Canadian and U.S. equity exposure since early September that use local-currency returns omit that 3.4 points.
Oil Is Not What Moves the TSX
The TSX fell 2.6% while WTI rose 15.7% between September 4 and September 15, and today another oil jump arrived alongside a falling 30-year yield. WTI closed at $105.83 on September 15 against $91.48 on September 4, and the TSX closed at 35,582.10 against 36,513.80.
At 3:53 PM ET today Brent was 8.0% above its September 4 close, WTI was 0.3% below it, and the TSX was 3.8% below it. Brent feeds Canadian inflation expectations and Bank of Canada hike odds, while WTI, the benchmark Canadian crude prices against, has gone nowhere.
WTI closed at $105.83 on September 15, up 15.7% from September 4, while the TSX closed 2.6% lower the same day. The dashed final segment is the 3:53 PM ET print on October 8.
The Market desk calculated this morning that daily TSX moves have a correlation of negative 0.66 with the U.S. 30-year yield over 21 sessions. Today fit the pattern: Brent rose 3.8%, the 30-year yield eased 5.5 basis points to 5.606% at 3:00 PM ET as Reuters reported Fed Governor Christopher Waller hinting at a possible pause, and the TSX gained. Brent eased from above $105 to about $103 after President Trump said the United States will not attack Iran before the November 3 midterm elections, and it still held a 3.8% gain.
The input to watch tomorrow morning is the 30-year yield at 5.606%, not Brent at $103.98.