Title: USD/CAD Weekly Forecast: Trump Tariffs Spark Renewed Trade Tensions
Original Author: Kenny Fisher, Forex Crunch
Adapted & Expanded by [Your Name/Company]
Overview
During the week of July 7–12, 2025, the USD/CAD currency pair experienced increased volatility as traders grappled with renewed trade tensions following former President Donald Trump’s announcement of proposed new tariffs. The markets responded swiftly to the rhetoric, igniting fears of another round of protectionist policies that could destabilize global trade relations, especially between the United States and its key trading partners, including Canada and China.
The Canadian dollar, often dubbed a commodity currency due to its close correlation with crude oil prices and trade matters, declined sharply this week. Market sentiment soured, prompting capital to flow into safer assets like the U.S. dollar. The result was a surge in USD/CAD, shifting attention from central bank policy to geopolitical and trade developments.
Let’s take a deep dive into how the latest developments influenced USD/CAD performance this week and what could lie ahead.
Key Developments Driving USD/CAD
1. Trump’s Proposed Tariffs Signal a Hawkish Trade Stance
– In a public statement, Donald Trump — the presumptive Republican nominee for the 2024 U.S. presidential election — proposed a sweeping 10% universal tariff on all imports and a staggering 60% tariff on Chinese goods.
– These announcements, though not yet policy, significantly rattled markets, especially considering Trump’s previous administration’s trade-related confrontations.
– Trudeau’s Canadian government promptly issued remarks expressing serious concern, fearing retaliatory measures and significant economic drawbacks for North America’s tightly woven supply chains.
– Investors interpreted the announcement as a potential headwind for global economic growth and international trade stability, increasing the demand for the relatively safe-haven U.S. dollar.
2. Federal Reserve and Bank of Canada Policy Divergence
– The U.S. Federal Reserve released fairly hawkish notes in recent communications, with key officials hinting that inflation is still sticky enough to delay substantial interest rate cuts.
– On the other hand, the Bank of Canada (BoC) has shown greater openness to easing monetary policy. At its July meeting, the BoC chose to hold rates steady at 4.75%, but with inflation easing below 3%, markets see potential room for cuts by Q3 or Q4 of 2025.
– This divergence boosted USD demand over CAD and strengthened the upward momentum in USD/CAD.
3. Crude Oil Prices Add Further Pressure on the Loonie
– As of July 12, WTI crude oil prices dipped below $72 per barrel amid weakened demand forecasts stemming from renewed trade tensions.
– With oil being Canada’s largest export, lower prices weigh on the country’s current account balance and GDP, hence weakening the Canadian dollar.
– Analysts at TD Securities noted that “any sustained downturn in crude oil brought on by trade fears jeopardizes Canada’s recovery.”
4. Safe-Haven Flows Dominate Market Sentiment
– Traders shifted capital into the U.S. dollar as a preferred safe-haven asset amid heightened global uncertainty.
– Bond yields in the U.S. slightly increased on expectations that tariffs would worsen inflation, potentially delaying rate cuts from the Fed.
Weekly USD/CAD Price Performance Summary
– Opening: 1.3630
– High: 1.3815
– Low: 1.3612
– Closing: 1.3780
– Change: +1.50% (approx.)
The pair touched a two-month high, showing strong bullish momentum, with technical indicators pointing to further upside if geopolitical headlines continue to drive investor sentiment.
USD/CAD Technical Outlook
Price action this week supported the bullish outlook for USD/CAD in both the short and medium term.
Support zones:
– 1.3685: Previous pivot level and
Read more on USD/CAD trading.