The Canadian dollar weakened toward 1.37 per US dollar on Friday, hovering near monthly lows, as surging US bond yields and a pullback in oil prices overshadowed a relief rally sparked by the US Supreme Court’s decision to strike down global tariffs. While the court’s move to invalidate emergency trade duties briefly improved risk sentiment, the loonie remained under pressure from a widening yield differential after US core PCE inflation hit 3%, reinforcing expectations of a more hawkish Federal Reserve.
On the domestic front, the Bank of Canada is holding its policy rate at 2.25%, as January CPI at 2.6% and softer US GDP growth of 1.4% complicate prospects for synchronized easing with the Fed. At the same time, crude oil prices gave back part of their weekly gains despite a 9 million-barrel drawdown in US inventories, weakening support from a key commodity that typically underpins the Canadian currency.
With the BoC signaling that current rates remain appropriate and US–Iran tensions bolstering the US dollar on safe-haven demand, the loonie continues to face headwinds. Investors are weighing the positive impact of reduced trade barriers against the drag from diverging monetary policy paths and softer commodity backing.
