The Canadian dollar, also known as the loonie, fell to a three-week low against the U.S. dollar on Thursday following U.S. President Donald Trump’s announcement that tariffs on Canadian goods will be enforced starting March 4. This clarification, coupled with Trump’s stance on trade, dashed any hopes for a delay, leading to a significant dip in the currency.
As of the latest figures, the loonie was trading at 1.4425 per U.S. dollar, representing a 0.8% decline, or 69.32 U.S. cents. This marks the weakest intraday level for the Canadian dollar since February 4, when it touched 1.4442, and marks its fifth consecutive day of losses.
Trump’s comments confirmed that his proposed 25% tariffs on Mexican and Canadian goods would take effect next week, as initially planned, citing ongoing drug flows from these countries into the U.S. His remarks came just a day after comments the previous Wednesday that had hinted at a possible delay until April 4. This shift in tone, from potential relief to imminent action, caused a sharp reaction in the market.
Erik Bregar, the director of FX & precious metals risk management at Silver Gold Bull, called the market response a “slap in the face” for those expecting a reprieve. He described the movement in the loonie as an “angry, get me out of the market” type of reaction.
Earlier this month, on February 3, the Canadian dollar had dropped to a 22-year low of 1.4793, driven by fears of tariffs, which had been delayed at the time. The market now appears to be pricing in the full impact of the tariff announcement.
Despite the loonie’s sharp decline, Canada’s oil prices saw a slight recovery, with crude up 2.2% at $70.11 per barrel. This increase came on the heels of supply concerns, particularly after Trump revoked a license allowing U.S. oil giant Chevron to operate in Venezuela. As one of Canada’s major exports, oil prices are often a key factor in the strength of the Canadian dollar.
Looking ahead, Canadian economic data could offer further insight into future market movements. The country’s fourth-quarter GDP report, set to be released on Friday, is expected to show annualized growth of 1.8%, which may influence expectations for future interest rate cuts by the Bank of Canada. At the same time, Canadian bond yields have shown mixed movement, with the 2-year yield falling by 1.4 basis points to 2.636%.
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Market sentiment was further weighed down by the stock market’s struggles, notably with shares of Nvidia plummeting by 8.5%, resulting in a massive $274 billion loss in market value. This market turbulence added to the overall sense of uncertainty.
As the looming tariffs and volatile economic indicators continue to shape market expectations, all eyes remain on upcoming reports and any potential policy adjustments from the Bank of Canada in response to the ongoing economic challenges.
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