USD/CAD Pauses Amid Trade War Uncertainty
The USD/CAD pair is struggling to capitalize on its bullish gap opening this week due to concerns over a deepening US-Canada trade war. Despite this, spot prices have snapped a three-day losing streak and remain up nearly 0.30% for the day. The Canadian Dollar (CAD) bears seem hesitant as the weak USD counters the US-Canada trade war.
The imposition of 50% tariffs on $20bn worth of Canadian goods by the US has led to a response from Canadian Prime Minister Mark Carney, who announced that Canada will impose retaliatory tariffs beginning on September 8. This move, combined with a modest pullback in crude oil prices, is undermining the commodity-linked Loonie and acting as a tailwind for the USD/CAD pair.
The US Dollar (USD) itself is hanging near its lowest level in more than three months due to diminishing odds of a rate hike by the Federal Reserve. The US Treasury's decision to double buyback operations for long-dated government debt starting in September has further weighed on the USD and capped the USD/CAD pair.
US Treasury Secretary Scott Bessent is set to announce what he calls 'the toughest sanctions in history' on Iran at a press conference today. This move could act as a tailwind for crude oil prices and the safe-haven USD, warranting caution before placing aggressive directional bets on the USD/CAD pair.