The Canadian dollar (CAD) lost just 0.19% against the U.S. dollar (USD) on Friday as investors assessed domestic data showing stronger-than-expected economic growth and awaited the potential implementation of U.S. trade tariffs.
👉 Possible effects for traders
Although USDCAD changed little on Friday, it was up as much as 1.69% for the week as traders priced in the likelihood of higher trade tariffs from the United States. Friday's data showed that Canada's gross domestic product (GDP) expanded by 2.6% annually in Q4, surpassing expectations of a 1.8% increase, driven by a jump in consumer spending. However, the relatively strong U.S. inflation data and trade tariff threats pushed USDCAD slightly higher on Friday.
Meanwhile, Canadian officials were expected to meet with U.S. Commerce Secretary Howard Lutnick, U.S. Trade Representative Jamieson Greer, and other senior Trump administration officials to forestall the tariffs. Canada seeks to show evidence of progress in curbing the flow of fentanyl opioids into the U.S. ahead of a 4 March deadline for punishing 25% tariffs on their goods imports. 'Markets remain somewhat sceptical that, if it comes to it, 25% tariffs will be in place for long.
The economic consequences for Canada from high tariffs are significant, but they are non-negligible for the U.S.', said Shaun Osborne, chief currency strategist at Scotiabank. If the Trump administration accepts the evidence and cancels the tariffs, USDCAD will likely drop sharply.
USDCAD was relatively unchanged during the Asian and early European trading sessions. Today, the main focus is on the U.S. ISM Manufacturing Purchasing Managers' Index (PMI), due at 3:00 p.m. UTC. Lower-than-expected figures might pause the rally in USDCAD and push the pair towards 1.44170. Conversely, higher-than-expected results may pull USDCAD towards recent highs near 1.44700.
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