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Canadian dollar outlook faces tariff risks despite improving data

Commerzbank points to a surprise jump in Canadian hiring and a falling unemployment rate to 6.4%, but flags a potential 50% US tariff threat if USMCA talks miss an August 19 deadline.

Reported · Written up by our desk · Major Pairs

FXStreet, citing Michael Pfister at Commerzbank, said the Canadian dollar has a supportive backdrop from improving Canadian fundamentals, including a stronger labour market, better GDP momentum, higher PMI readings and improving exports. However, the bank warned any CAD recovery is fragile due to renewed risks tied to US trade policy.

Commerzbank highlighted that Canada added about 75,000 jobs, versus a median Bloomberg consensus estimate of 20,000, and that the unemployment rate unexpectedly fell to 6.4%, the lowest level in two years. Pfister characterized this as evidence of a slow real economy recovery from strains in Canada US economic ties.

At the same time, Commerzbank noted that the US president has announced new tariffs of 50% on certain Canadian goods if no agreement is reached by August 19. Pfister said he still expects a one-year extension of USMCA to be agreed, given how closely the two economies are intertwined, but added that diversification away from the US would likely be a lengthy process.

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