Investing.com — The Canadian dollar declined to its weakest level in one week on Tuesday after the United States announced new tariffs on Canadian goods, prompting investors to scale back expectations for Bank of Canada interest rate increases this year.
The loonie traded 0.2% lower at , or , reaching its lowest point since last Tuesday.
President Donald Trump announced 50% tariffs on Monday covering a broad range of Canadian imports. The U.S. administration said the tariffs respond to Canada’s discriminatory treatment of American-made cars, alcohol and dairy products. The tariffs will take effect on August 19.
Kevin Ford, FX and macro strategist at Convera, said the currency movement reflects interest rate expectations more than tariff concerns. “The 30-day window on the latest U.S. tariff threat gives markets reason to treat this as another negotiating tactic rather than an immediate break in the trade relationship,” Ford said.
The swap market now prices in 13 basis points of interest rate increases from the Bank of Canada by December. This represents a decrease from 16.5 basis points before the tariff announcement and 18 basis points before Monday’s Canadian inflation data, which came in below expectations.
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