Canadian Dollar Drifts Lower Amid Broader USD Gains and Trade Tensions

The Canadian Dollar (CAD) has been slightly softer in recent times, reflecting broader USD gains and weaker oil prices, according to Scotiabank strategists Shaun Osborne and Eric Theoret. They note that USD/CAD trades almost exactly at their fair value estimate near 1.3862.

The CAD's response to Canadian retaliatory tariffs on US goods has been limited, with the tariffs announced on September 8th in response to the latest tariff blast from the US. These tariffs check a minor CAD bounce but are unlikely to have a significant impact.

Trade tensions continue to affect investment in North America, with Honda potentially reconsidering its plans for new plants in the region unless the CUSMA agreement is renewed. The underlying CAD fundamentals have seen a minor deterioration but spot continues to stick to their fair-value estimate.