FX.co ★ Loonie Under Pressure Amid Tariff Uncertainty

The Canadian dollar has appreciated beyond 1.43 per USD, having previously retreated from its three-week peak of 1.43 observed on March 17. This shift can be attributed to heightened trade tensions, discrepancies in monetary policy, and a worsening economic outlook. President Trump’s threats to impose tariffs on Canadian imports, compounded by existing U.S. tariffs on steel and aluminum, have dampened investor confidence. Concurrently, the Bank of Canada's recent interest rate reduction to 2.75% has exacerbated the interest rate differential with the Federal Reserve, prompting capital outflows. The OECD has revised Canada’s growth forecast down to 0.7% for 2025 and 2026, further solidifying the negative sentiment as inflation rose to 2.6% in February. This increase is mainly attributed to tariffs creating cost pressures rather than an indication of robust economic performance. Meanwhile, activity in futures and options markets reveals a growing inclination to bet against the Canadian dollar, highlighting sustained downside risks.