FX.co ★ Canadian Dollar Losses Ground After Trade Negotiation Fallout

The Canadian dollar has slid beyond 1.37 against the US dollar, primarily due to recent threats on US tariffs and uncertainties in trade policies overshadowing previous gains. President Trump's declaration to halt all trade negotiations with Canada, following the introduction of Canada's new digital services tax, accompanied by cautionary statements about impending retaliatory tariffs, has unsettled exporters and shaken confidence in short-term economic growth. On the domestic front, Canada's economy is anticipated to experience consecutive monthly contractions of 0.1% in April and May, underlining its susceptibility to US tariffs and casting a negative outlook on trade-dependent industries. Concurrently, oil prices are subdued due to stability in the Middle East, removing a vital support for Canada’s terms of trade. Despite the Bank of Canada maintaining its policy rate at 2.75%—citing persistent core inflation and indicating that no rate cuts are likely until disinflation is fully established—this assertive stance has not been sufficient to offset the economic pressures instigated by renewed tariff concerns.