US-Canada Trade War Fuels Weakness in Canadian Dollar

The US imposed tariffs on $20bn worth of Canadian goods after trade talks between the two countries fell apart. The response from Canada was to impose retaliatory tariffs, beginning on September 8.

This move undermines the commodity-linked Loonie and acts as a tailwind for the USD/CAD pair. Meanwhile, the US Dollar (USD) hangs near its lowest level in more than three months due to diminishing odds of a rate hike by the US Federal Reserve (Fed).

The US Treasury announced last week that it would at least double buyback operations for long-dated government debt starting in September, further weighing on the USD.