Summary:
The Canadian dollar hit a one-month low on Tuesday as trade war fears grew after Trump announced 25% tariffs on goods from Canada and Mexico.
The Canadian dollar hunkered near their lowest in a month on Tuesday as trade war fears sapped sentiment after Trump said 25% tariffs on goods from the two neighbouring countries will take effect on Tuesday.
Trump said there was "no room left" for a deal that would avert the tariffs by curbing fentanyl flows into the US. But business leaders warn that would deal a serious setback to the highly integrated North American economy.
US crude oil futures settled nearly 2% lower on reports OPEC+ will proceed with a planned oil output increase in April and on worries that a trade war could hurt the global trade.
The S&P Global Canada Manufacturing PMI fell to 47.8 from 51.6 in January, its first move below the 50 mark since August. As a result, the bond yields fell across the curve on growing rate cut bets.
Canada has prepared a sweeping package of counter-tariffs against US-made products, its foreign minister said. The BOC said that a prolonged tariff war could chop Canadian output by nearly 3% over two years.
She also said government officials have had good conversations with members of the Trump administration, but "there's a level of unpredictability and chaos" from Washington.
Loonie has pushed below the support at 50 SMA amid high volatility. We see it continue to fall if Canada fails to strike a deal which lowers the tariffs significantly.
Disclaimer: This material is for general information purposes only and is not intended as (and should not be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by EBC or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.
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