November was a month for the ages. Traders were left in the dark due to the US government shutdown that delayed or cancelled scheduled economic reports, and the government did not reopen until November 12. The odds for the Fed to leave rates unchanged or cut them by 25 bps were extremely volatile, and the US dollar was inversely correlated to those moves. Equity markets were very choppy due to elevated speculation that high valuations for AI and AI-tech stocks were in “bubble” territory. The month ended quietly due to the US Thanksgiving holiday.
December’s focus is on the December 10 FOMC meeting, as well as ongoing US-led peace talks between Russia and Ukraine.
The USD and Federal Reserve
The US dollar spent the first week of November racking up gains, then spent the next two weeks consolidating them. That changed in the final week after comments from Fed officials and mixed to weak economic data drove the greenback lower into month end. Traders are united in the belief that the Fed will deliver a 25 bp rate cut, which will knock the benchmark rate down to 3.75%, with the odds for such a move at 90%, according to the CME FedWatch tool. However, the risk that rates get left unchanged is very real. The FOMC committee is divided. Four members are openly advocating for lower rates, while five others are not convinced a rate cut is needed at this time. Fed Chair Jerome Powell and two others have not hinted that they favour either view. Once the FOMC meeting is out of the way, the focus will turn to the holiday season.
The Canadian Dollar and Bank of Canada
The Bank of Canada (BoC) cut its benchmark rate to 2.50% on September 17, which was expected, but Governor Tiff Macklem signalling it was the last cut was not. USDCAD rallied on the news, then bounced erratically in a 1.3970–1.4140 range until the last day of the month when prices dropped to 1.3940. Canadian Q3 GDP jumped 2.6%, which impressed economists until they dug deeper into the numbers. They were not impressed. The underlying components told a story of an economy that is struggling, evidenced by the downgrade to Q2 growth, the lack of traction in exports, and another sluggish showing for business investment. Those results do not bode well for Q4 growth, which is enough to justify another BoC rate cut on December 10. Most analysts believe that policymakers will play it safe and keep policy settings unchanged.
Oil Prices
WTI oil prices traded sideways in November, albeit with a bearish bias. Prices were weighed down by forecasts from the International Energy Agency and the Energy Information Administration that warned of oversupply in the first half of Q1 2026. OPEC responded by leaving production quotas unchanged for the first three months of 2026. Ukraine strikes on Russian oil infrastructure and US–Venezuela tensions are underpinning prices for the time being. However, if the US manages to successfully broker a Russia and Ukraine peace agreement, resumptions of Russian oil will exacerbate the oversupply situation.
Sources: Bloomberg, Investing.com, Reuters
Bank 2025-USD/CAD Q4 2026-USD/CAD Q1
Scotiabank* 1.4000 1.3800
BMO 1.3900 1.3700
CIBC 1.3800 1.3800
TD Bank* 1.3800 1.3800
National Bank 1.4200 1.3900
*Forecast is based on last month. Forecast Table is for mid-market rates, and subject to change anytime.
