The Canadian dollar weakened to its lowest level since mid-August, trading near 72.07 U.S. cents and pushing the USD/CAD exchange rate to about 1.3876 on Monday. The loonie touched an intraday high of 1.3836 and a low of 1.3893 before settling around current levels, reflecting mounting pressure from escalating trade tensions and persistent U.S. inflation.
U.S. inflation data released Friday reinforced concerns about price stability, with the Federal Reserve’s preferred measure, the core Personal Consumption Expenditures (PCE) index, holding at 3.3% year-over-year in July. Headline PCE inflation also remained elevated at 3.7%, unchanged from June and above the 3.6% forecast. Both metrics remain well above the Fed’s 2% target, reducing prospects for imminent monetary easing and supporting a stronger U.S. dollar.
The currency’s decline coincides with a deepening trade dispute between Ottawa and Washington. Canada announced retaliatory tariffs targeting approximately C$27.6 billion (about $20 billion) of U.S. goods, covering more than 700 products. The measures mirror U.S. tariffs imposed on a similar value of Canadian imports, including a 50% levy on certain goods. Ottawa confirmed the retaliatory tariffs will take effect on September 8, intensifying economic friction between the two nations.
The escalation follows public remarks from U.S. President Donald Trump, who stated it was "time to teach Canada you can't do this anymore," underscoring the political dimension of the dispute. The clash threatens to disrupt cross-border supply chains and weigh on economic sentiment in both countries as policymakers navigate rising protectionist pressures.
