**USD/CAD Weekly Forecast: Protectionist Policies Challenge Canadian Dollar**
*Adapted and expanded from an article originally authored by Kenny Fisher on ForexCrunch.com.*
The Canadian dollar (CAD) has come under renewed pressure as increasing trade tensions and protectionist rhetoric continue to negatively impact the country’s growth outlook. Throughout the past week, the USD/CAD pair saw a strong upward momentum, reflecting investor concerns that growing trade barriers—particularly targeting Canadian goods—could take a significant toll on Canada’s export-driven economy.
This weekly forecast outlines the fundamental and technical factors influencing USD/CAD, with a forward-looking analysis for traders and investors. As the United States and Canada remain interdependent economies, developments around tariffs, trade policies and central bank actions in both nations play a critical role in shaping this currency pair.
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## Overview: Key Factors Moving USD/CAD
For the week ending August 16, USD/CAD traded within a rising channel, boosted mainly by external macros such as U.S. economic resilience, rising yields, and protectionist developments that cast doubt on Canada’s trade outlook.
**Main Drivers:**
– **Trade Policy Uncertainty:** The United States continues to voice concerns about trade deficits, particularly with key partners like China and Canada. While no sweeping protectionist measures have been introduced yet, the threat of tariffs and import restrictions lingers, creating market unease.
– **Differing Economic Performance:** U.S. economic data pointed to steady growth, while Canada’s recent macro data has been mixed, prompting speculation on possible rate adjustments by the Bank of Canada (BoC).
– **Crude Oil Volatility:** As a major oil exporter, Canada’s economy and the CAD are sensitive to oil price movements. While oil had some midweek volatility, it ultimately failed to provide CAD with meaningful support.
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## U.S. Economic Snapshot
The U.S. economy continues to show relative strength, underpinned by firm job market performance, resilient consumer demand, and moderating inflation. The key economic indicators released during the week reinforced expectations that the Federal Reserve could keep its benchmark interest rate higher for longer.
### U.S. Economic Highlights:
– **Core Consumer Price Index (CPI):** Core CPI held steady at 0.2% month-over-month for the fourth consecutive month, showing that underlying inflation pressures are stabilizing.
– **Retail Sales:** U.S. retail sales for July rose 0.7% month-over-month, stronger than the forecasted 0.4%. Consumers remain an essential driver of U.S. GDP, and this strong reading aided USD strength.
– **Producer Price Index (PPI):** The PPI reading exceeded expectations, up 0.3% month-over-month (vs 0.2% consensus), raising concerns about wholesale inflation potentially feeding into future consumer prices.
– **Federal Reserve Outlook:** Hawkish Fed minutes and consistent positive economic surprises have pushed U.S. Treasury yields higher. Markets are gradually buying into the idea that rate cuts may be delayed into mid or even late 2025.
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## Canadian Economic Snapshot
While Canada’s economy had shown stability earlier in the year, recent data showed cracks forming within key sectors including manufacturing and housing. These minor weaknesses have intensified focus on the BoC’s potential monetary strategy in response to trade disruptions.
### Canadian Economic Highlights:
– **Manufacturing Sales:** Declined 1.7% in June, the largest drop in nearly a year. Falling demand for durable goods and lagging exports contributed to the downturn.
– **Employment Trends:** Canada’s jobs market remains surprisingly robust, but wage pressures are beginning to show signs of easing. The recent jobs report showed only modest employment gains.
– **Housing Starts:** July housing starts fell to an annualized rate of 254,000 units, a 10 percent decrease from June. Though still healthy, this decline signals slowing activity in the housing market.
– **BoC Policy Direction:** The Bank of Canada remains cautious. Governor Tiff Macklem
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