**USD/CAD Posts Weekly Loss Despite Rebounding from 12-Week Lows**
*By TradingPedia. Expanded and adapted with additional research.*
The US dollar displayed resilience against the Canadian dollar during the week ending December 15, 2025, as it steadied after reaching its lowest level in 12 weeks. The USD/CAD currency pair managed to recover some ground, yet still settled with a weekly loss, highlighting the changing tides in investor sentiment and macroeconomic developments spanning both nations.
This article takes a deeper look into the major economic events impacting USD/CAD’s moves during the week, the technical outlook, and evolving market sentiment. It integrates insights from TradingPedia’s original analysis and augments it with additional expert perspectives.
## Key Takeaways from the Week
– The USD/CAD dipped below 1.3400 during intraday trading, reaching levels last seen 12 weeks ago.
– Despite the initial retreat, the pair managed to climb back toward 1.3450 before the weekend, trimming some of its weekly losses.
– Weaker-than-expected US inflation data and dovish Federal Reserve commentary played a significant role in pushing the US dollar lower through the week.
– Canada’s economic indicators, including strong employment and signs of stabilization in oil prices, lent additional support to the loonie.
– Fed Funds futures started pricing in early rate cuts in 2026, while the Bank of Canada remains cautious, leading to adjustments in monetary policy expectations.
## US Dollar Pressured by Weak Inflation and Fed’s Policy Stance
The main drag on the greenback throughout the week was data showing a sharper-than-expected deceleration in US inflation. The Consumer Price Index (CPI) report for November revealed:
– Year-over-year headline inflation rising 3.1 percent, down from the previous 3.2 percent reading.
– Core inflation data (excluding food and energy) remained steady at 4.0 percent, still higher than the Fed’s 2 percent target but showing no signs of reacceleration.
The CPI release, coupled with dovish signals from the Federal Reserve’s December meeting, caused investors to reassess their expectations for interest rates in 2026.
### Federal Reserve Signals Shift Toward Easing
At its December 13 meeting, the Federal Open Market Committee (FOMC) kept rates unchanged in the 5.25–5.50 percent range. However, market attention quickly zeroed in on projections and remarks from Chair Jerome Powell:
– The Fed’s updated dot plot indicated at least three 25 basis point rate cuts in 2026, a shift from prior projections.
– Powell stated inflation was “moving in the right direction” and acknowledged growing risks if policy remains tight for too long.
– Fed Funds futures now imply around 100 basis points in cumulative rate cuts across 2026, with a growing consensus for easing to begin as early as March.
These developments weakened the US dollar across multiple currency pairs, not just against the Canadian dollar. Lower yields in US Treasuries also dampened dollar demand.
## Canadian Dollar Supported by Domestic Data and Oil Prices
While the US dollar contended with softening inflation and dovish central bank rhetoric, the Canadian dollar benefited from a more favorable economic narrative during the same period.
### Resilient Canadian Labor Market Bolsters the Loonie
Canada’s labor market reported better-than-expected job gains for November:
– Employment rose by 25,400 positions, above the expected increase of 15,000 jobs.
– The unemployment rate remained stable at 5.8 percent.
– Wage growth stayed strong, supporting household consumption.
This data added to the argument that the Bank of Canada may not be in a hurry to cut rates as early as its US counterpart, giving the CAD a relative advantage.
### Oil Price Stabilization Provides Tailwind to CAD
Commodity-linked currencies like the Canadian dollar tend to benefit when oil prices rise or stabilize. During the week
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