Canadian Dollar Soars to New High! Over 10,000 Workers Laid Off as Canada and U.S. Launch New Round of Trade Talks in May
Driven by the U.S.’s flip-flopping trade policies and expectations that the Bank of Canada will pause interest rate cuts, the Canadian dollar surged strongly on Friday (April 11), hitting a five-month high against the U.S. dollar and shaking financial markets.
According to forex data, the loonie rose 0.7% that day, trading at 1 USD to 1.3880 CAD — approximately 72.05 U.S. cents per Canadian dollar — and briefly touched 1.3840 during the session, its strongest level since November 6 of last year. For the week, the Canadian dollar gained a total of 2.4%, rising for six consecutive days and marking its biggest weekly gain since June 2020 — a five-year record.
The Canadian dollar also jumped against the Chinese yuan, briefly reaching 5.2810 earlier in the day. Although it later pulled back, it remained at its highest level since August 2023.
George Davis, Chief Technical Strategist at RBC Capital Markets, noted that market confidence in the U.S. government is weakening due to its inconsistent tariff policies, raising concerns about the American economic outlook and putting pressure on the U.S. dollar — a trend that has benefited the Canadian dollar.
The U.S. Dollar Index (DXY) weakened against a basket of major currencies, while U.S. 10-year Treasury yields headed for their largest weekly gain in nearly 20 years. At the same time, U.S. consumer sentiment in April dropped sharply, and one-year inflation expectations soared to their highest level since 1981.
Bank of Canada Policy in the Spotlight
With stock market volatility and U.S. tariffs now officially in effect, uncertainty surrounding Canada’s economic outlook is growing. Market consensus suggests there’s a 60% chance the Bank of Canada will pause interest rate cuts at its policy meeting on April 16. Last month, the central bank lowered its benchmark interest rate to 2.75% and stated it would proceed “cautiously” to balance inflationary pressure and weak demand.
However, TD Bank senior economist James Orlando believes further rate cuts remain likely. He expects the Bank of Canada to cut rates by at least another 50 basis points in the coming months to offset the impact of U.S. tariffs.
Stephen Brown, Deputy Chief North American Economist at Capital Economics, forecasts that although Canada may avoid recession, its economic growth will stagnate and inflation will continue to rise. He predicts the Bank of Canada could cut rates three more times, bringing them down to 2%. He also warned that widening Canada-U.S. interest rate differentials could drag the loonie back below 70 U.S. cents, potentially falling to 0.69 USD.
Auto Industry Hit Hard — Over 10,000 Jobs Lost
Canada’s auto industry is facing turbulence due to U.S. tariffs on Canadian-made vehicles. Automaker Stellantis announced production halts at its plants in Windsor, Ontario; Warren, Michigan; and Mexico, affecting an estimated 12,000 auto parts workers.
The Windsor plant has informed employees of a two-week shutdown starting April 7, with potential further adjustments depending on production needs. The company cited the U.S.’s new tariff policy as a direct cause of the stoppage.
Meanwhile, General Motors’ CAMI plant in Ingersoll, Ontario, is also affected and will pause electric vehicle production until October, resulting in 500 layoffs. The plant will begin temporary layoffs on April 14, briefly resume operations in May, and then halt production again until October 2025.
The facility will undergo equipment upgrades in preparation for a new vehicle model launching in 2026, shifting to single-shift operations in the future.
Canada-U.S. Trade Talks Set for May
Amid rising trade tensions, Canadian Prime Minister Carney confirmed on Friday that he had reached an agreement with U.S. President Biden to launch a new round of trade negotiations in early May.
Carney announced on social media that the Cabinet Committee on Canada-U.S. Relations held an emergency meeting that morning in response to the latest U.S. tariffs. He acknowledged: “These changes have had an impact on our economy, particularly the job market.”
He emphasized that the government is actively working to protect the auto industry and workers’ rights, and announced the cancellation of the Employment Insurance (EI) waiting period to allow affected workers quicker access to benefits.
“We’ve developed a strategy to ensure that no matter the outcome of the next election, Canada will stand firm in defending national interests against U.S. pressure,” Carney said.
