USD/CAD trades around 1.3870 on Thursday, down a modest 0.05% on the day at the time of writing.
The Canadian Dollar (CAD) is struggling to fully benefit from the stability of the US Dollar (USD), as escalating trade tensions between the United States (US) and Canada continue to fuel concerns over the Canadian economic outlook
Trade relations between the two countries remain in focus after US tariffs of 50% on a range of Canadian goods came into effect. The move follows the failure of negotiations between Washington and Ottawa to reach a trade agreement. In response, Canadian Prime Minister Mark Carney announced tariffs of up to 50% on around $20 billion worth of US imports.
The escalation raises concerns about a more pronounced impact of the trade dispute on Canadian economic activity and limits the Loonie’s ability to strengthen. The Canadian Dollar, however, receives some support from Oil prices, as geopolitical risks maintain a premium in the energy market. As Canada is a major Oil exporter to the United States, resilient energy prices help limit downside pressure on its currency.