Loonie Slips Despite Strong Canadian GDP

2026-08-28 17:55 By Isabela Couto 1 min. read

The Canadian dollar weakened to 1.39 per USD from a three-month high of 1.376 reached on August 21st, as a more restrictive policy signal from Fed Chair Warsh supported the US dollar.

Warsh said the Fed is tracking the PCE index as an inflation gauge, using firmer rhetoric than earlier suggestions that a newly created task force could shift the central bank’s preferred measure.

Rate futures shifted toward pricing a potential Fed rate hike next month.

Meanwhile, the BoC is widely expected to keep rates unchanged at its September 2nd meeting.

A Fed hike alongside a BoC hold would widen the US-Canada rate differential, making US assets more attractive and putting further pressure on the Canadian dollar.

Canada’s GDP expanded at its strongest pace in nearly two years, amid a rebound in auto production, providing a buffer against trade risks.

However, President Trump’s threat to raise tariffs on Canadian cars, trucks and auto parts to 50% from January 1st, 2027, remained a headwind.



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Loonie Slips Despite Strong Canadian GDP
The Canadian dollar weakened to 1.39 per USD from a three-month high of 1.376 reached on August 21st, as a more restrictive policy signal from Fed Chair Warsh supported the US dollar. Warsh said the Fed is tracking the PCE index as an inflation gauge, using firmer rhetoric than earlier suggestions that a newly created task force could shift the central bank’s preferred measure. Rate futures shifted toward pricing a potential Fed rate hike next month. Meanwhile, the BoC is widely expected to keep rates unchanged at its September 2nd meeting. A Fed hike alongside a BoC hold would widen the US-Canada rate differential, making US assets more attractive and putting further pressure on the Canadian dollar. Canada’s GDP expanded at its strongest pace in nearly two years, amid a rebound in auto production, providing a buffer against trade risks. However, President Trump’s threat to raise tariffs on Canadian cars, trucks and auto parts to 50% from January 1st, 2027, remained a headwind.
2026-08-28
Canadian Dollar Holds Losses on Fresh Tariffs
The Canadian dollar weakened to 1.38 per USD from the three-month high of 1.376 on August 21st as a greater deterioration to trade with the US hampered the outlook on growth. Canada imposed retaliatory tariffs of 15%-50% on a $20 billion of US annual import flows, including metals, agricultural goods, and motorcycles. This was Ottawa's response to the increase on US tariffs against Canada after trade talks between both economic partners collapsed. US President Donald Trump said that tariffs on all Canadian cars, trucks, automotive parts and steel would rise to 50% on January 1st, 2027, in addition to new tariffs on multiple other goods sectors. Risks to growth from higher tariffs drove markets to reduce expectations of a rate hike by the Bank of Canada this year, even though elevated energy prices threatened a pickup in inflationary risks.
2026-08-25
Canadian Dollar Falls on US-Canada Trade War
The Canadian dollar fell to around 1.38 per US dollar from a three-month high of 1.376 on August 21st as the US-Canada trade war intensified following the collapse of negotiations. US President Donald Trump said that tariffs on all Canadian cars, trucks, automotive parts and steel would rise to 50% on January 1, 2027. This was after Prime Minister Mark Carney vowed to retaliate the initial series of tariffs by the US that were imposed after trade talks fell through. Washington imposed 50% tariffs on furniture, plastics, plywood and electrical equipment, adding to existing 25% tariffs on steel, lumber and autos. Risks to growth from higher tariffs reduced the argument for a rate hike by the Bank of Canada this year, even though elevated energy prices threatened a pickup in inflationary risks.
2026-08-24