FX.co ★ Loonie Stabilizes as Canada Rescinds Digital Services Tax

The Canadian dollar held steady at around 1.367 against the US dollar following the Canadian Finance Ministry's announcement late Sunday that it is withdrawing its digital-services tax. This decision aims to foster trade negotiations with the United States. The announcement comes in response to US President Donald Trump's declaration that he would "terminate ALL discussions on Trade with Canada" after Ottawa's plan to tax American tech companies. Despite this favorable development, the Canadian dollar's potential for appreciation remains constrained. Geopolitical tensions in the Middle East have eased, leading to a decrease in oil prices—depriving the Canadian currency of a significant support factor in its terms of trade. In addition, sentiment is further dampened by underwhelming economic data. Canada's GDP declined by 0.1% in April, with initial estimates suggesting a similar drop for May. This data indicates that the economy might experience a slight contraction in the second quarter, as economic activity remains under pressure from tariff-related uncertainties.