USD/CAD Surges as US-Canada Trade Tensions Escalate Amid Ongoing Oil Price Support

US-Canada trade tensions are escalating, pushing USD/CAD to its highest level in months.

The Canadian dollar weakened after US tariffs were imposed on $20 billion worth of exports over the weekend. In response, Canada is set to retaliate with tariffs from September 8.

Oil prices remain elevated due to rising tensions in the Middle East, providing some support for the loonie and offsetting pressure from the trade dispute.

However, the US dollar is also recovering after falling almost 1% last week. The recent weakness followed the US Treasury's intervention in the long-end of the bond market, which pushed Treasury yields lower and added to concerns around the US fiscal outlook and the dollar.