The Canadian dollar received only limited support from the recent delay in US tariffs on Canadian goods, according to a foreign exchange note from Commerzbank. While the postponement was initially viewed as a positive development, analysts cautioned that underlying trade tensions remain unresolved, leaving businesses hesitant about long-term investment decisions.
As of the latest trading session, USD/CAD remained elevated near recent highs. The pair initially strengthened after the tariff delay announcement, but those gains quickly eroded as investors remained skeptical about a sustained recovery in the loonie. Commerzbank emphasized that the delay does not eliminate the risk of future tariffs and that prolonged uncertainty could dampen Canadian growth prospects.
At the same time, fading expectations for additional Federal Reserve rate hikes provided some support. Recent US economic data pointed to cooling inflation and a softening labor market, prompting traders to scale back bets on further Fed tightening. A pause in the US-Canada tariff dispute also improved risk sentiment, while firmer crude oil prices—an important Canadian export—helped underpin the currency.
The Bank of Canada is monitoring the situation closely. Market participants are pricing in potential rate cuts if trade tensions escalate again, and diverging monetary policy between the Federal Reserve and the Bank of Canada could keep USD/CAD under pressure. For businesses and investors, the tariff pause offers temporary breathing room but not long-term certainty.
