Canadian Dollar Plunges as US Tariffs and Trade Talks Collapse

The Canadian dollar declined across the board after US-Canada trade talks collapsed and Washington imposed 50% tariffs on about $20 billion of Canadian goods. The move prompted Canada's Prime Minister Justin Trudeau to vow 'dollar-for-dollar' retaliation from September 8.

Broad US dollar weakness also contributed to the decline in the loonie, with the USD/CAD pair falling into a key support zone around 1.3750 before bouncing into Friday's close on profit-taking and possibly some hedging into the weekend.

The Treasury buyback announcement had a QE-like effect by lowering long-term yields and easing financial conditions, although it's not technically quantitative easing. The focus will now shift to the Federal Reserve and Warsh's speech at the Jackson Hole Symposium next week, which could be a market-moving event if he leans against the easing in financial conditions.