The Canadian dollar (CAD) held firm against the US dollar (USD) on Monday, with USD/CAD stabilizing after last week’s sharp retreat from its highest level since May 20. Friday’s pullback was driven by dovish remarks from Federal Reserve Chair Jerome Powell at the Jackson Hole Symposium, which triggered a broad sell-off in the Greenback.
While the US dollar attempts a modest rebound to start the week, a partial recovery in crude oil prices has kept the loonie supported, limiting downside pressure and anchoring the pair near recent lows.
At the time of writing, USD/CAD trades around 1.3820 in the New York session. The US Dollar Index (DXY), which tracks the Greenback against six major currencies, is edging higher after nearly a 1% slide on Friday, hovering just below the 98.00 level.
Trade relations provide added support for CAD
Bilateral trade dynamics returned to the spotlight after Prime Minister Mark Carney confirmed Friday that Canada will lift counter-tariffs on US goods covered under the USMCA, effective September 1. The rollback applies to more than $21 billion worth of exports, including wine, juice, packaged foods, and household appliances, signaling a notable de-escalation in trade tensions.
Carney emphasized that Canada “currently has the best trade deal with the US” and underscored the importance of safeguarding that advantage. However, tariffs on autos, aluminum, and steel will remain in place as discussions intensify to resolve sector-specific disputes. He also noted the possibility of reaching a sector-focused agreement before the formal USMCA review in 2026, suggesting proactive efforts are underway.
Key economic events ahead
Traders will now look to incoming data for directional cues. US durable goods orders are due Tuesday, followed by remarks from Bank of Canada Governor Tiff Macklem on Wednesday.
The primary focus, however, will fall on Friday’s double release: the US Core PCE Price Index — the Fed’s preferred inflation metric — and Canada’s Q2 GDP figures. Together, these reports will offer critical insights into monetary policy divergence between the Fed and the BoC, setting the stage for the next major move in USD/CAD.
