Key Moments
- USD/CAD trades near 1.4084, rising for a second straight session as investors favor the US Dollar.
- A newly announced 50% US tariff on nearly $20 billion of Canadian imports pressures the Canadian Dollar.
- WTI crude around $84.32 per barrel and nearly 2.5% higher on the day may help limit USD/CAD upside.
USD/CAD Supported by Safe-Haven Flows and Policy Divergence
USD/CAD remains bid as heightened tensions in the Middle East underpin demand for the US Dollar (USD), while the Canadian Dollar (CAD) faces additional headwinds from renewed trade frictions and softer domestic inflation.
At the time of writing, the currency pair trades around 1.4084, extending its move higher for a second consecutive day.
New US Tariffs Intensify Pressure on the Canadian Dollar
US President Donald Trump announced a 50% tariff on nearly $20 billion worth of Canadian imports, an amount described as roughly 0.85% of Canada’s Gross Domestic Product (GDP). The new measures are scheduled to come into force on August 19.
Canadian Prime Minister Mark Carney called the tariffs a “direct violation” of the USMCA. At the same time, he emphasized that Ottawa remains committed to negotiations.
Soft Canadian Inflation Reinforces Steady BoC Stance
Canadian inflation data released on Tuesday came in weaker than expected, reinforcing the Bank of Canada’s (BoC) decision to maintain its current policy stance. With price pressures easing, the urgency for an interest rate increase diminishes, creating further near-term challenges for the Canadian Dollar.
Middle East Escalation Lifts USD, While Oil Rebound Aids CAD
On the geopolitical front, the US military conducted a tenth consecutive night of strikes against Iran on Monday, while Iran’s Revolutionary Guards targeted US military assets across the region.
In this environment, the US Dollar continues to attract safe-haven flows. The US Dollar Index (DXY) – which tracks the Greenback against a basket of six major currencies – trades around 101.10, marking its fourth straight day of gains.
Oil markets are also reacting, with West Texas Intermediate (WTI) crude trading near $84.32 per barrel, up nearly 2.5% on the day and at its highest level in more than a month. As a commodity-linked currency, the Canadian Dollar could benefit from higher Oil prices, potentially tempering further upside in USD/CAD.
Diplomatic Efforts Continue Despite Ongoing Strikes
Despite the ongoing military activity, diplomatic initiatives remain underway. The Associated Press reported that Iranian officials began meeting with mediators in Pakistan on Tuesday. Reuters reported on Monday that mediators had proposed a 10-day ceasefire to help restore last month’s interim agreement.
Canadian Dollar Performance Against Major Currencies
The following table summarizes the Canadian Dollar’s percentage moves against major peers today, based on the cross-currency matrix provided. According to the data, the Canadian Dollar was strongest against the British Pound.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.03% | 0.42% | 0.20% | 0.06% | -0.12% | 0.21% | 0.18% | |
| EUR | -0.03% | 0.40% | 0.17% | 0.04% | -0.12% | 0.18% | 0.15% | |
| GBP | -0.42% | -0.40% | -0.22% | -0.36% | -0.51% | -0.21% | -0.24% | |
| JPY | -0.20% | -0.17% | 0.22% | -0.14% | -0.31% | -0.01% | -0.02% | |
| CAD | -0.06% | -0.04% | 0.36% | 0.14% | -0.17% | 0.15% | 0.12% | |
| AUD | 0.12% | 0.12% | 0.51% | 0.31% | 0.17% | 0.31% | 0.28% | |
| NZD | -0.21% | -0.18% | 0.21% | 0.01% | -0.15% | -0.31% | -0.03% | |
| CHF | -0.18% | -0.15% | 0.24% | 0.02% | -0.12% | -0.28% | 0.03% |
The heat map indicates percentage changes between major currencies. The base currency is taken from the left column and the quote currency from the top row. For instance, selecting the Canadian Dollar from the left column and moving horizontally to the US Dollar cell shows the percentage move for CAD (base)/USD (quote).
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