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Canadian Dollar Struggles Against US Dollar Amid Trade Surplus
Confirmed
In Short: The Canadian dollar is holding steady but struggling to rally against the US dollar despite a wider-than-expected trade surplus.
The Canadian dollar (CAD) is holding steady but struggling to rally against the US dollar, despite a wider-than-expected trade surplus. Spot prices for the CAD/USD pair are currently hovering just above the 1.4200 mark, up only 0.05% for the day, according to FXStreet.
The US dollar (USD) has attracted dip-buyers following Tuesday's profit-taking slide, offering support to the USD/CAD pair. This trend is bolstered by the USD's recent two-day rally, its strongest since 2022, as global capital flows into the currency amid geopolitical uncertainty.
Canada's status as a major energy exporter is playing a crucial role in how the Canadian dollar is reacting to the latest geopolitical shock. Oil prices are acting as a buffer for the CAD, stabilizing it even when broader financial markets are under stress.
However, safe-haven demand is boosting the US dollar, creating a powerful counterforce that is preventing a stronger rally for the Canadian dollar. The USD's strength is making it difficult for the CAD to gain meaningful ground against the USD, even with rising oil prices.
The Canadian dollar is once again finding itself pulled in two directions. When oil prices climb, global demand for Canadian exports increases, which can help stabilize the CAD. This is one reason the Canadian dollar has held up relatively well compared with other major currencies.
The current trade war between Canada and the US began after Trump returned to office and imposed a series of tariffs on Canadian goods. Opinion polls suggest the majority of Canadians support the imposition of retaliatory tariffs on the US.
The Canadian Chamber of Commerce has urged the Carney government to take a surgical approach to retaliation. One sector that saw a modest bump was manufacturing, attributed to consumers and businesses buying more made-in-Canada products.
The share of US-bound Canadian exports dropped to 66% from an average of 75% before the trade war, according to July trade figures.
Prime Minister Mark Carney has said that Canada's pivot away from the US as its largest trading partner 'will come at a cost', as a wave of Canadian retaliatory tariffs on American goods come into force.
The US economy is about 13 times larger than Canada's, and the majority of Canadian exports are sold to the US. Both US and Canadian officials have said they would like to strike a deal, but no new talks have been scheduled since negotiations collapsed in late August.
What this adds
The Canadian dollar's resilience is being tested by the ongoing geopolitical tensions and the strength of the US dollar, despite the positive trade surplus figures.
The impact of the trade war on Canadian exports and the economy remains a significant concern for policymakers and businesses.
What's confirmed
- The Canadian dollar (CAD) is holding steady but struggling to rally against the US dollar, despite a wider-than-expected trade surplus. Spot prices for the CAD/USD pair are currently hovering just above the 1.4200 mark, up only 0.05% for the day, according to FXStreet.
- The US dollar (USD) has attracted dip-buyers following Tuesday's profit-taking slide, offering support to the USD/CAD pair. This trend is bolstered by the USD's recent two-day rally, its strongest since 2022, as global capital flows into the currency amid geopolitical uncertainty.
- Canada's status as a major energy exporter is playing a crucial role in how the Canadian dollar is reacting to the latest geopolitical shock. Oil prices are acting as a buffer for the CAD, stabilizing it even when broader financial markets are under stress.
- However, safe-haven demand is boosting the US dollar, creating a powerful counterforce that is preventing a stronger rally for the Canadian dollar. The USD's strength is making it difficult for the CAD to gain meaningful ground against the USD, even with rising oil prices.
- The Canadian dollar is once again finding itself pulled in two directions. When oil prices climb, global demand for Canadian exports increases, which can help stabilize the CAD. This is one reason the Canadian dollar has held up relatively well compared with other major currencies.
- The current trade war between Canada and the US began after Trump returned to office and imposed a series of tariffs on Canadian goods. Opinion polls suggest the majority of Canadians support the imposition of retaliatory tariffs on the US.
- The Canadian Chamber of Commerce has urged the Carney government to take a surgical approach to retaliation. One sector that saw a modest bump was manufacturing, attributed to consumers and businesses buying more made-in-Canada products.
- The share of US-bound Canadian exports dropped to 66% from an average of 75% before the trade war, according to July trade figures.
- Prime Minister Mark Carney has said that Canada's pivot away from the US as its largest trading partner 'will come at a cost', as a wave of Canadian retaliatory tariffs on American goods come into force.
- The US economy is about 13 times larger than Canada's, and the majority of Canadian exports are sold to the US. Both US and Canadian officials have said they would like to strike a deal, but no new talks have been scheduled since negotiations collapsed in late August.
What's still developing
- On the other, global uncertainty tied to the rapidly expanding Middle East conflict is driving investors toward the U.S. dollar.
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- “Carney and Canada have become symbolic of resistance to him,” Canadian historian Robert Bothwell said.
- Nelson Wiseman, professor emeritus of political science at the University of Toronto, said Trump’s 2024 reelection deepened Canadians’ distrust of the United States — not just its government, but the judgment of Americans.
- “The Canadian public is behind the Carney government and the world is watching what will happen next,” said Béland, the McGill political scientist.