While net long positions on the U.S. dollar versus its Canadian counterpart are below the peak of last October, the possible onset of significant tariffs on Canadian imports into the U.S. has taken a toll on the Canadian dollar.
Should higher tariffs on Canada announced by the United States take effect, we would expect the value of the loonie to continue depreciating against the dollar to partially offset those trade taxes.
Given the potential shock on the North American auto and food ecosystems that tariffs would pose, a bout of volatility inside foreign exchange markets is in the offing over the next several weeks as decisions on these tariffs are reached.
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