Canadian Dollar Trapped Between Trade War Risks and Q2 Growth

The Canadian dollar has struggled to hold gains despite positive growth data, as trade war risks continue to overshadow the currency. According to Brown Brothers Harriman (BBH), the loonie's resilience in the second quarter was a result of strong consumer spending and rebounding exports.

The Q2 GDP growth rate of 2.2% annualized is a significant improvement from the 1.7% contraction in Q1. However, BBH strategists caution that this momentum may be short-lived due to ongoing trade tensions with major partners.

The U.S.-Canada trade relationship remains tense, with disputes over softwood lumber, dairy, and automotive tariffs. These unresolved issues have created an uncertain environment for businesses and investors, undermining the positive GDP data.