Canadian Dollar Weakens on Trader War Concerns & Slowing Growth

The Canadian dollar was weak across the board today, reaching the lowest level in more than a year against many of its most-traded peers. There were several possible reasons for that, most important of them were prospects for trade wars and slowing economic growth in Canada.

Canada’s gross domestic product rose just 0.1% in December. While markets expected such reading, it was still a slowdown from the 0.4% growth in November. The weakening growth may convince the Bank of Canada to delay normalization of monetary policy, and that does not bode well for the currency.

Following yesterday’s announcement of tariffs on steel and aluminum imports, US President Donald Trump tweeted today about benefits of trade wars:

When a country (USA) is losing many billions of dollars on trade with virtually every country it does business with, trade wars are good, and easy to win. Example, when we are down $100 billion with a certain country and they get cute, don’t trade anymore-we win big. It’s easy!

It is not clear yet whether there will be exemptions. If Canada is not exempt from duties, it will certainly hurt the country’s trade revenue as Canada is the biggest exporter of steel to the United States.

Prices for Canada’s biggest export commodity, crude oil, rose today, but that did not help the loonie.

USD/CAD climbed from 1.2835 to 1.2899 as of 18:48 GMT today. EUR/CAD rallied from 1.5744 to 1.5873, trading near the highest level since January 2016. CAD/JPY dropped from 82.74 to 81.85, touching the weakest level since December 2016.

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