Canadian dollar underperforms early

I find it odd that CAD is under-performing in the early going.

USD/CAD is up 70 pips or 0.5% to 1.4360. The loonie is the weakest currency among all the majors.

The trigger was Trump talking about reciprocal tariffs along with steel/aluminum tariffs. The steel/aluminum tariffs are a factor for the loonie but I wouldn’t say it’s a big one. Canada is a supplier of steel and aluminum to the US to the order of about $11 billion in aluminum and around $7 billion of steel.

I wouldn’t expect a big drop in steel/aluminum shipments even with tariffs as they only fell 10-15% last time so we’re talking about less than $2 billion overall, which is a drop in the bucket of Canada-US trading.

As for the reciprocal tariffs, I don’t think those would apply to Canada as there are very few higher tariffs (if any) across the northern border. If anything, it would make Canadian exports more attractive than European or Asian ones. The caveat would be that a reciprocal trade ‘war’ would hurt global growth and sting the loonie.

Still, I don’t see that as a good reason for the loonie to be at the bottom of the list. In any case, it might just represent thin liquidity as the Candian dollar is only moderately softer than AUD and NZD.

This article was written by Adam Button at www.forexlive.com.