TORONTO: The Canadian dollar weakened against its US counterpart on Friday as the outlook for a trade deal between Canada and the United States grew suddenly more uncertain and after data earlier in the day showed a contraction in the domestic economy.
US President Donald Trump said in a post on Truth Social that the US is immediately ending trade talks with Canada in response to the country’s digital services tax on technology companies. Canada sends about 75% of its exports to the US
“We’ve been kind of weak all morning after the weaker GDP print, lower oil prices, the US dollar bouncing,” said Erik Bregar, director, FX & precious metals risk management at Silver Gold Bull.
“This Trump post about terminating all discussions with Canada has seen the floor fallout from underneath the Canadian dollar.”
The loonie was trading 0.6% lower at 1.3720 per US dollar, or 72.89 US cents, after touching its weakest intraday level since Monday at 1.3758. For the week, the currency was up 0.1%.
Canada’s gross domestic product fell 0.1% in April from March, led by a 0.6% decline in goods-producing industries as US tariff uncertainty spurred some motor vehicle manufacturers to scale back production. A preliminary estimate showed a further decline of 0.1% in May.
“We suspect that the underlying softness in growth and employment will eventually pave the way for additional (interest) rate relief,” Doug Porter, chief economist at BMO Capital Markets, said in a note.
Investors see a roughly 60% chance the Bank of Canada leaves its benchmark interest rate on hold at 2.75% at a
policy decision on July 30 but are leaning toward a cut in September.
The US dollar clawed back some recent declines against a basket of major currencies, while the price of oil posted a steep weekly decline.
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