The Canadian dollar weakened past 1.37 per USD, as fresh US tariff threats and trade-policy uncertainty overwhelm earlier strength. President Trump’s announcement that he was terminating all trade discussions with Canada over its new digital services tax—and warning of imminent retaliatory tariffs—has rattled exporters and undermined confidence in near-term growth.
Domestically, Canada’s economy was poised for back-to-back 0.1% monthly contractions in April and May, highlighting its vulnerability to US levies and dampening the outlook for trade-sensitive sectors. Meanwhile, oil prices remain subdued amid a stable Middle East, stripping the loonie of a key terms-of-trade support pillar. Although the Bank of Canada held its policy rate at 2.75%, citing sticky core inflation and signalling that further cuts are unlikely until disinflation is well-entrenched, this hawkish stance has been insufficient to counteract the combined drag of revived tariff fears.
