Summary of USDCAD Analysis - July 11, 2025
The USD/CAD currency pair is currently trading at 1.37958, reflecting a decrease of 0.12%. The Canadian dollar has depreciated by over 0.3% against the US dollar following the announcement of new tariffs by the United States on Canadian goods, set at 35%. This announcement has led to a rebound in the USDCAD pair from a resistance zone between 1.373 and 1.375, although the situation has been somewhat mitigated by calming remarks from Canadian officials.
Recent Developments in US-Canada Trade Relations
Earlier in the week, there were signs of easing trade tensions between the US and Canada, particularly after a meeting between former President Donald Trump and Canadian Prime Minister Mark Carney. The discussions were characterized by a mutual desire to enhance North American competitiveness, with both parties aiming to finalize a trade deal by July 21. Canada had also decided to withdraw its proposed 3% digital services tax aimed at US companies.
However, tensions escalated again shortly after, as Trump announced the retaliatory tariffs, citing issues such as Canada’s dairy import quotas and the ongoing fentanyl crisis. This announcement resulted in a significant decline in the value of the Canadian dollar, although the impact was somewhat softened by reassurances from Canadian officials, who emphasized that negotiations are still in progress and that Canada, being the largest buyer of US goods, holds a strategic position in these discussions. They also clarified that the proposed tariffs would not apply to goods compliant with the USMCA (United States-Mexico-Canada Agreement).
Implications of Upcoming Labor Market Data
The Canadian dollar may face additional pressure depending on the results of the upcoming labor market report. Current forecasts suggest a modest employment increase of 10,000 jobs, up from 8,800 in May, driven by slight improvements in manufacturing sentiment and overall business confidence. However, the deteriorating trade relations with the US could hinder this progress. Employers are reportedly adjusting hours worked rather than hiring new staff, which may lead to an increase in the unemployment rate to 7.1%. This situation highlights the Canadian economy's vulnerability to external political shocks.
Conclusion
The current dynamics between the US and Canada, particularly regarding trade tariffs and labor market conditions, are critical factors influencing the USD/CAD exchange rate. Investors should closely monitor these developments as they could significantly impact market sentiment and currency valuations in the near term.