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Canadian dollar extends rally to about 72 cents as trade talks drag on

A narrower Canada-U.S. interest-rate gap, after a firm Canadian labor report and steadier U.S. CPI, pushed the loonie to 72 cents U.S., with Monday’s Canadian inflation data and the Aug. 19 tariff deadline key swing factors.

Reported · Written up by our desk · Major Pairs

The Canadian dollar extended its rally to about 72 cents U.S. as markets digested a relatively well-behaved U.S. CPI print and Canada’s labor-market outperformance, which helped narrow the interest-rate gap between the two countries, according to Action Forex.

Action Forex said the dynamics have extended the loonie’s move partly by lifting Canadian yields, while recent data have tempered some expectations for Fed rate hikes, shrinking differentials on two-year borrowing costs by more than 20 basis points to the lowest level since June.

Attention remains on Canada-U.S. trade negotiations ahead of an Aug. 19 deadline tied to a potential new U.S. tariff threat. Details on any possible deal remain limited, and the outlet noted that tariff relief, or the lack of it, could materially affect sector activity, investment, and business confidence.

Action Forex also pointed to Monday’s Canadian inflation report as a potential catalyst, with headline inflation expected around 2.9% due to higher gasoline prices, and investors focused more on core measures. It said any escalation risk tied to the 50% steel and aluminum tariffs, and other levies, could also weigh on the economy’s recovery and rate expectations.

Latest closeGasoline (RBOB) $2.901 ▼7.3%

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