**USD/CAD Weekly Forecast: Trade Tensions and Economic Divergence Weigh on the Canadian Dollar**
*Adapted and expanded from the original article by Kenny Fisher on Forex Crunch, with additional research and context included*
The USD/CAD pair has been navigating turbulent waters recently, with the Canadian dollar struggling against the surging greenback. The mixed signals from global trade policy, diverging economic indicators, and persistently high inflation in the U.S. have all contributed to the volatility of this currency pair. As concerns over trade barriers build and oil prices fluctuate, the CAD faces mounting headwinds. Meanwhile, the resilient U.S. economy presents fewer reasons for the Federal Reserve to cut rates quickly, supporting continued USD strength.
This detailed forecast explores the key factors influencing the USD/CAD exchange rate, examining how trade tensions, energy prices, and macroeconomic indicators are shaping market sentiment. With multiple risk events on the calendar for both the U.S. and Canada, traders should proceed with caution while keeping these dynamics in mind.
## USD/CAD Weekly Overview
During the week ending August 16, 2025, the USD/CAD pair posted modest gains as the Canadian dollar continued to stagger under increasing economic pressure. A resurgence in USD strength, underpinned by sticky inflation and labor market resilience in the United States, has created an unfavorable setup for the loonie.
Key performance highlights:
– USD/CAD rose roughly 0.3% during the week.
– The pair flirted with 1.3500 but faced resistance amid choppy price action.
– Canadian economic indicators signaled weakness, reinforcing expectations of additional dovishness from the Bank of Canada (BoC).
## Trade Barriers and Protectionist Policies Weigh on CAD
Growing concern over protectionist trade measures, particularly from the United States, has heightened risks for the Canadian economy, which relies heavily on exports to its southern neighbor. Canada generally benefits when global trade is open and unhindered, given its significant exposure to international commodity markets and the integrated nature of the North American trading bloc.
Key developments:
– U.S. policymakers have hinted at reevaluating existing trade agreements, including aspects of the USMCA (United States-Mexico-Canada Agreement).
– Tariffs on key Canadian exports, such as aluminum and lumber, are back in the discussion among U.S. lawmakers, triggering investor concern about reduced demand for Canadian goods.
– Canada’s manufacturing exports, which depend on stable cross-border trade, face new headwinds that could undermine industrial output and GDP growth.
Canada’s vulnerability to trade restrictions is particularly acute during periods of global economic uncertainty, when governments turn to protectionist measures to shield domestic industries. Any disruption in access to the U.S. market could lead to a broad-based decline in Canadian business confidence and capital expenditures.
## Oil Prices Offer Limited Support to the Loonie
As a major oil-exporting nation, the Canadian dollar often tracks movements in global crude prices. While West Texas Intermediate (WTI) crude briefly surged above $87 per barrel during the week, it quickly reversed and ended the week lower due to renewed concerns over global demand and production ramp-ups from OPEC+.
Factors limiting CAD support from oil:
– WTI finished the week around $83.50, a decline from earlier levels.
– Demand forecasts for crude were revised down by both OPEC and the International Energy Agency (IEA), citing weak economic momentum in China and Europe.
– Canada’s oil producers face higher transport and refining costs, narrowing profit margins even when prices are relatively elevated.
Although a rebound in oil prices might normally provide relief for the CAD, current energy market dynamics suggest that gains will likely be capped unless there is a significant geopolitical shock or supply disruption.
## Divergent Economic Data Fuels USD Strength
While Canada’s latest economic data pointed to slower growth and a cooling labor market, the U.S. economy continued to defy bearish forecasts, with several key indicators surprising to the upside.
Read more on USD/CAD trading.