USD/CAD: Markets mull tariff threat – Scotiabank

Spot is little changed on the day as the Canadian Dollar (CAD) consolidates. CAD sentiment has taken a hit in the wake of Trump’s tariff threats but sentiment was already pretty weak anyway and, after the initial CAD slide on the headlines Tuesday evening, USDCAD has tended to drift modestly lower. More CAD losses seem inevitable unless the Canadian government can muster a response that satisfies the incoming administration quickly, however. That may not be easy, Scotiabank’s Chief FX Strategist Shaun Osborne notes.

CAD trades little changed on the session

“Trump’s recently named ‘border czar’ Tom Homan recently called the northern border 'an extreme national security issue' which suggests an quick fix to the president-elect’s concerns may be elusive. The risk of 25% tariffs remains just that at the moment but the longer the threat lingers and the closer we get to the inauguration, the weaker the CAD may trade.”

“Consolidation remains the name of the game for the CAD. Spot movement since the late Monday peak suggests a firm rejection of 1.41+ levels on the short-term chart for now but there broader pattern of trade also suggests the USD is consolidating ahead of another push higher at this point.”

“USD losses are likely to remain well-supported on minor dips to the 1.4000/25 area for now and the CAD really needs to push back through the 1.3945/50 area to show any sort of rebound potential.”