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USD/CAD stays bid on firm dollar, trade-war pressure and oil risk
Scotiabank said the collapse of US-Canada trade talks has hurt CAD sentiment, while US tariffs of 50% on $20bn in Canadian goods set up further uncertainty.
The Canadian dollar remained under pressure in the USD/CAD market, with the pair holding a positive bias for a second straight day and trading in the mid-1.3800s during the Asian session on Tuesday, FXStreet reported.
FXStreet pointed to a firmer US dollar supported by geopolitical safe-haven demand amid escalating US-Iran tensions, where the US outlined a campaign to isolate Iran from the global economy and warned of sanctions for countries doing business with Iran. It also noted that Iran has said it would halt all oil exports through the Strait of Hormuz if an economic war continues.
On the Canadian side, the outlet linked CAD weakness to concerns over a deepening US-Canada trade war. The US imposed 50% tariffs on $20bn of Canadian goods on Saturday, after trade talks fell apart, and Canadian Prime Minister Mark Carney said Canada will begin retaliatory tariffs on September 8.
FXStreet added that firmer crude prices could support the oil-linked loonie and limit downside for USD/CAD, but it said inflation risks from volatile energy prices keep expectations for at least one US Federal Reserve rate hike in 2026 on the table. It also cited Scotiabank strategists saying the trade talk collapse torpedoed positive CAD sentiment built over the prior four weeks.
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