Just a few hours in the past, the US President printed a letter to Canada to tell them of the introduction of 35% tariffs from 1 August. As traditional, he justified this by citing the big portions of fentanyl allegedly coming into the US from Canada. Added to this was the truth that Canada had reacted to earlier tariffs, which Trump doesn’t often tolerate, Commerzbank’s FX analyst Michael Pfister notes.
Multi-month downward pattern in USD/CAD could cease
“Following the announcement, the Canadian greenback understandably depreciated considerably. It solely recovered considerably after experiences emerged that USMCA-compliant items can be exempt from the upper tariffs. Nevertheless, as is usually the case, this stays unclear. We’ve not but heard something from Trump relating to this matter, and experiences recommend {that a} closing choice has but to be made.”
“As we warned way back, CAD merchants shouldn’t be too assured that Donald Trump will go away his northern neighbours alone now. Though the downward pattern in USD/CAD over a number of months was primarily because of the weak point of the USD, we repeatedly emphasised that this might not essentially proceed indefinitely, given the weak state of the Canadian financial system.”
“Whereas the announcement got here as a shock, it confirms our view. We are going to now have to attend and see what Trump’s closing choice on USMCA-compliant items shall be, however the Canadian greenback is prone to face a turbulent few weeks forward.”
