Trump Demands Lower Rates as Canada Trade War Weighs on Loonie

The US-Canada trade war has reversed part of the Canadian dollar's summer rally, but the currency remains within its long-running range. The introduction of 50% US tariffs and reciprocal measures from Canada have had a significant impact on Canadian exporters.

However, if damage to these exporters gives the Bank of Canada more latitude to cut rates than the Fed, traders may see a widening rate differential and a lower loonie. President Donald Trump has demanded that the Federal Reserve slash interest rates or he will cut off trade with countries that maintain trade deficits with the US.

The latest jobs report showed a strong increase in nonfarm payrolls, with 162,000 jobs added in August. This was significantly higher than expected, and the unemployment rate held steady at 4.1%. The report suggests that the economy is still growing strongly, which may lead to increased pressure on the Fed to keep interest rates low.