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.
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