Canada's Loonie Under Pressure as Trade Tensions Escalate with the US

The Canadian Dollar remains under pressure as trade tensions between Washington and Ottawa persist. The US has imposed tariffs of up to 50% on certain imports, prompting Canada's Prime Minister Mark Carney to announce retaliatory tariffs of up to 50% on around $20 billion worth of US imports.

This escalation raises concerns about a more pronounced impact of the trade dispute on Canadian economic activity and limits the Loonie's ability to strengthen. However, resilient energy prices are providing some support for the Canadian Dollar, as Canada is a major Oil exporter to the United States.

The Federal Reserve (Fed) is also in focus, with investors awaiting Fed Chair Kevin Warsh's speech on Friday at the Jackson Hole Symposium for fresh indications about the path of interest rates. The latest US inflation data has reinforced market caution over the monetary policy outlook, with the Personal Consumption Expenditures (PCE) Price Index standing at 3.7% YoY in July.