Loonie Sinks as Trade Tensions and Fed Outlook Weigh on Canadian Dollar

The Canadian dollar weakened on Friday, experiencing its steepest weekly decline in over two months. Despite Canada's economy growing at a 3.3% annualized pace in the second quarter, outperforming the Bank of Canada's previous forecast, the loonie was unable to find support.

This comes as investors increased bets that the Federal Reserve could raise interest rates in September, following remarks from Federal Reserve Chair Kevin Warsh. The stronger U.S. dollar, which rose about 0.6% to 99.69, its highest level since August 17, was a major contributor to the loonie's decline.

The currency remains vulnerable due to ongoing Canada-U.S. trade tensions, with markets focused on how new tariffs and retaliatory measures will affect growth in the second half of the year.