The US Dollar (USD) trades 0.2% higher at around 1.3870 against the Canadian Dollar (USD) during the European trading session on Wednesday.
The Loonie pair strengthens as the Canadian Dollar underperforms due to trade tensions between the United States (US) and Canada
Last week, President Donald Trump announced 50% tariffs on a range of Canadian goods took effect on Saturday after both nations failed to reach a trade deal. In retaliation, Canadian Prime Minister (PM) Mark Carney said earlier this week that the country would impose its own retaliatory tariffs beginning on September 8, CNBC reported. US-Canada trade spat deepens as retaliatory tariffs cloud outlook Strategists at Danske Bank note that US-Canada trade frictions have intensified after Ottawa moved to respond to Washington’s latest actions.
In their words, “trade tensions have escalated further after Canada announced retaliatory tariffs of up to 50% on USD 20 billion of imports from the US, following Trump’s plan to raise taxes on cars and auto parts from Canada.” Danske argues the Canadian measures “appear proportional and aimed at strengthening Canada’s negotiating position,” yet cautions that they “add uncertainty for businesses on both sides of the border and risk further pressure on prices and supply chains.” The bank also highlights that as Canada goes “tit-for-tat” in its response, “the Trump administration is said to be weighing additional measures against it,” underscoring the risk of a more entrenched and disruptive trade dispute. Meanwhile, the US Dollar trades slightly higher ahead of the United States (US) Personal Consumption Expenditure Price Index (PCE) data for July, which will be published at 12:30 GMT. The US core PCE inflation, which is closely tracked by Federal Reserve (Fed) officials, is expected to have remained steady at 3.3% Year-on-Year (YoY), with monthly figures rising at a 0.2% pace, faster than the June reading of 0.1%.