Canadian Dollar Weakens on U.S. Inflation and Trade Dispute
The Canadian dollar slipped to C$1.3892 per U.S. dollar, its lowest level since August 19, and was last quoted around C$1.3876, representing a 0.27% rise against the greenback. Earlier in the session the loonie touched an intraday high of C$1.3893 and a low of C$1.3836, while its value in U.S. cents stood at approximately 72.07.
U.S. inflation data for July showed headline personal consumption expenditures (PCE) inflation unchanged at 3.7% year‑over‑year, above the 3.6% consensus, and core PCE remaining at 3.3%. Both headline and core measures increased 0.2% from the prior month, reinforcing market expectations of a Federal Reserve rate hike, with futures pricing a higher probability of a September increase.
Concurrently, Canada announced retaliatory tariffs worth C$27.6 billion (about $20 billion) on U.S. imports, mirroring the value of tariffs imposed by Washington, which are set at 50% on a comparable basket of Canadian goods. The Canadian measures target more than 700 products and are scheduled to take effect on September 8.
U.S. President Donald Trump intensified rhetoric, stating it was “time to teach Canada you can’t do this anymore,” adding uncertainty to the stalled trade negotiations between the two nations.
The combination of heightened U.S. rate‑hike expectations and the emerging trade dispute creates a double‑headwind for the loonie. Market participants also monitor oil prices, given Canada’s status as a major energy exporter and the currency’s sensitivity to crude‑price movements.