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USD/CAD holds intraday gains as US-Canada trade war fears rise
The pair is near 1.38 after the US imposed 50% tariffs on $20bn of Canadian goods, while Canada plans retaliatory tariffs starting September 8.
The USD/CAD pair is struggling to extend a bullish gap opening on Monday, but it remains positively biased intraday as investors weigh concerns that US-Canada tensions could deepen. Spot prices are trading just below 1.3800, up nearly 0.30% for the day, after snapping a three-day losing streak that had dragged the pair to a three-month low on Friday, according to FXStreet.
The latest tariff developments are weighing on Canada’s outlook and supporting the Canadian dollar only limitedly, with the US imposing 50% tariffs on $20bn worth of Canadian goods on Saturday after trade talks broke down on Friday. Canada’s Prime Minister Mark Carney said retaliatory tariffs would begin on September 8, FXStreet added, while a modest pullback in crude oil prices also undermines the commodity-linked Loonie.
FXStreet also pointed to factors on the US side, noting the US dollar is near its lowest level in more than three months as the odds of a US Federal Reserve rate hike fade. In addition, the US Treasury said it would at least double buyback operations for long-dated government debt starting in September, a move that has triggered a pullback in long-dated bond yields and further weighs on the USD.
On the risk front, FXStreet said US Treasury Secretary Scott Bessent is expected to announce the toughest sanctions in history on Iran at a press conference on Monday. An Iranian official warned Iran would halt all oil exports through the Strait of Hormuz and elsewhere in the Persian Gulf if the economic war continues, keeping war risk in focus and potentially influencing crude prices and safe-haven demand for the dollar.
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