The Canadian Dollar weakens as Ottawa vows retaliatory tariffs and domestic aid, increasing uncertainty for businesses amid stalled trade negotiations.
The Canadian Dollar declined 0.5% against the USD after US-Canada trade talks abruptly collapsed on Friday, reversing recent gains. Scotiabank strategists noted the CAD is the worst-performing G10 currency as markets digest the fallout from the failed negotiations.
Prior to the collapse, sentiment around the CAD had improved over the past four weeks. However, Ottawa’s pledge to match US tariffs dollar-for-dollar and provide additional domestic aid has heightened economic uncertainty. Analysts warn of intensified headwinds for Canadian businesses amid a potential prolonged trade dispute.
While the broader USD/CAD downtrend remains intact, Scotiabank sees potential for short-term USD gains toward the mid-to-upper 1.39 range. Market reaction has been muted, suggesting investors view the situation as fluid and still anticipate a possible deal in the coming weeks.