Tariffs and Inflation Pressure Weigh on Canadian Dollar Outlook
Canadian economic indicators are facing pressure from inflation and trade tensions, according to Brown Brothers Harriman's Elias Haddad. The July Consumer Price Index (CPI) is expected to show core inflation below 2%, which would reinforce an extended Bank of Canada pause on interest rate hikes.
Haddad flags the looming US tariffs on nearly $20 billion worth of Canadian imports, which would add another headwind to the economy. This includes a range of products from wine and hockey sticks to cement, but energy, potash, and certain critical minerals are exempt.
The expected core CPI reading is 1.85% for the second straight month, below the Bank of Canada's target of 2%. The tariff imposition on Wednesday could weigh on the Canadian dollar against the US dollar, particularly if trade talks do not yield a breakthrough.