Canadian Dollar: Trade tensions threaten recovery against US Dollar - OCBC

OCBC’s Sim Moh Siong and Christopher Wong warn that renewed US-Canada trade tensions could undermine the Canadian Dollar’s (CAD) recent recovery. The collapse of trade talks, followed by 50% US tariffs and Canada’s planned dollar-for-dollar retaliation from 8 September, adds fresh uncertainty to the economic outlook just as falling unemployment had begun to support the loonie.

Tariffs threaten recent CAD recovery

"Just as a Canada-U.S. trade deal appeared within reach, negotiations collapsed at the last minute."

"The U.S. has imposed 50% tariffs on about USD20bn of Canadian imports, prompting Canada to announce dollar-for-dollar retaliation from 8 September, targeting sectors such as steel, dairy and electronics."

"The breakdown adds fresh uncertainty to the future of the USMCA and could weigh on Canada's improving economic outlook."

"Domestic conditions had been showing signs of rebound, with unemployment falling for a third consecutive month in July to a two-year low of 6.4%, helping the CAD recover some lost ground."

"However, renewed trade tensions threaten to derail that momentum and may leave the loonie vulnerable after its recent rebound."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)