Trade War Weighs on Canadian Dollar Amid Stronger Than Expected GDP Growth

The Canadian dollar faces renewed headwinds as trade war risks overshadow a stronger-than-expected Q2 GDP rebound. The loonie has struggled to hold gains despite positive growth data, with analysts pointing to escalating trade tensions as the primary drag on the currency.

Canada's economy showed resilience in the second quarter, with GDP growth rebounding at an annualized rate of 2.2%, according to Statistics Canada. This marks a significant improvement from the 1.7% contraction in Q1, driven by strong consumer spending and a rebound in exports.

However, BBH strategists caution that this momentum may be short-lived as the trade war with major partners continues to cloud the outlook. The growth figure initially supported the Canadian dollar, but the currency quickly gave back gains as investors focused on the broader trade conflict.