- Aluminum Tariffs Concerns
- BOC Monetary Plans
- BOC Negative Interest Rate Plans
The Canadian Dollar was on the defensive, Tuesday morning, weakening against the greenback as it emerged the U.S is planning to re-impose tariffs on Canadian aluminum imports. The remarks saw the Canadian Dollar weaken against the Dollar after strengthening Monday as the new Bank of Canada Governor Tiff Macklem outlined plans to revitalize the Canadian economy.
A plunge to one-week lows appears to have elicited some buying pressure on the USD/CAD pair, which is the subject of extreme volatility in the forex market. The pair has struggled to break out f of one-month highs on increased volatility in the Canadian Dollar and the greenback.
The Canadian Dollar strengthened Monday as Governor Macklem reiterated plans to deliver low stable and predictable inflation in the effort of driving economic recovery following COVID-19. The Bank of Canada quashing any push to negative interest rates to fuel economic recovery also helped fuel bids on the Canadian Dollar against the greenback.
The BOC says it will focus on asset purchase programs over negative rates until a recovery is complete. The USD/CAD pair edged lower as the BOC insisted on supporting the economy and meeting the 2% inflation target rather than stabilizing the market as it has been the case elsewhere.
However, the Canadian Dollar came under pressure Tuesday morning after it emerged the United States us planning to re-impose tariffs on Canadian aluminum imports. According to people familiar with the matter, the U.S is planning on imposing a 10% tariff on aluminum should Canada fail to impose export restrictions.
The tariffs could come into effect as early as July 1, when the U.S Mexico-Canada trade agreement is poised to come into effect. A trade standoff between Canada and the U.S is the latest tailwind that should continue to influence USD/CAD price action.
Traders also await the release of U.S PMI data for June likely to influence greenback strength conversely USD/CAD direction of trade.