Canadian Dollar Weakens Amid Escalating Trade War

The Canadian Dollar remains under pressure against the US Dollar due to the intensifying trade war between the two nations. The escalation of tariffs on Canadian steel and aluminum exports has created significant uncertainty for Canadian exporters, reducing demand for the loonie.

According to recent data, the trade-weighted Canadian Dollar has fallen approximately 2.5% since the latest tariff announcements, reflecting the market's assessment of potential economic damage.

The policy divergence between the Bank of Canada (BoC) and the Federal Reserve is also contributing to the USD/CAD strength. The BoC is expected to cut interest rates to cushion the economy against trade shocks, while the Fed remains cautious about easing, citing persistent inflation and strong employment data.