Mitsubishi UFG Sees Canadian Dollar Continuing to Underperform

12:34 PM EST, 11/03/2025 (MT Newswires) -- In October, the Canadian dollar (CAD or loonie) weakened further against the US dollar in terms of

London closing rates from 1.3928 to 1.4012, said MUFG.

The Bank of Canada, at its meeting last week, cut the key policy rate by 25bps to 2.25%, the ninth cut in this easing cycle that began in June 2024 with cumulative total easing now of 275bps.

The Canadian dollar weakened in October, although the depreciation was more modest compared to many other G10 currencies -- indeed following the BoC meeting

CAD moved up the G10 performance table and and ended the month the second-best performing G10 currency, noted the bank.

Crude oil prices fell in October but did rebound from

weaker levels on supply factors. United States President Donald Trump's decision to sanction Rosneft and Lukoil is the most aggressive action taken since Russia's invasion of Ukraine and is expected to curtail global crude oil supplies. Nymex crude oil increased nearly 8% in a two-day period when the announcement was made.

Data from Canada also helped curtail CAD depreciation, stated MUFG. The employment report revealed a 60,400 increase in jobs, with over 100,000 of full-time employment, partially offset by part-time job losses. The

unemployment rate dropped 0.1ppt to 7.1%.

Inflation was also stronger with the headline, median and trimmed consumer price index year-over-year rates all jumping more than expected.

The BoC cut rates, which was mostly priced, but the communication that coincided with the reduction saw expectations of further cuts reduced. The BoC cut its real gross domestic product forecast this year from 1.8% to 1.2% and in 2026 from 1.6% to 1.1%.

These are "substantial" revisions and the BoC now estimates the Canadian economy will be 1.5% smaller by

end-2026 due to U.S. trade tariffs, added the bank. However, the signal from the BoC was that rates

are "about right."

MUFG continues to expect the CAD to underperform other non-US dollar (USD) G10 currencies and another 25bps reduction is feasible if the Federal Reserve can continue cutting.

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