Trade uncertainty from USMCA non-renewal and BoC survey data weigh on the Canadian dollar despite narrower US-Canada yield spreads.
The Canadian dollar remains soft against the US dollar, trading around 1.4215 as consolidation continues. Narrower front-end yield spreads between the US and Canada have failed to lift the CAD, which retains a weak undertone amid lingering trade risks.
The US decision not to renew the USMCA agreement prolongs uncertainty for Canadian exporters, while the Bank of Canada’s Q2 Business Outlook Survey may reflect this sentiment. Though the CAD appears fundamentally undervalued, its discount to equilibrium has narrowed, capping potential gains.
Resistance for USD/CAD is seen near 1.4250, with support levels holding for now. The broader USD rally may pause before another upward push, keeping CAD upside limited in the near term.