The Canadian dollar reached its highest level in more than five months on Monday, and one currency expert says she expects the loonie to continue to climb against a weakening U.S. dollar after Canada’s economy avoided a worst-case tariff scenario.
“The Canadian dollar has been benefiting not just from the U.S. dollar weakness but also the fact that tariffs on Canada were not as stringent as we expected,” Jayati Bharadwaj, global FX strategist at TD Securities, told BNN Bloomberg in a Monday interview.
The loonie was hovering at around 72 U.S. cents on Monday afternoon.
Bharadwaj said that since U.S. President Donald Trump shifted his main tariff focus to China, Canada’s trade tensions with its southern neighbour have calmed somewhat, since most goods covered within the existing United States-Mexico-Canada Agreement (USMCA) are tariff free.
“Trump seems to be targeting mainly non-USMCA compliant goods, and… most of the trade between Canada and the U.S. should end up being compliant within USMCA, it’s just a matter of the exporters registering their goods as such,” she explained.
“So, depending on the time as to when you can establish that most of the trade between the two countries falls within USMCA, that should help the Canadian dollar.”
Bharadwaj said the eventual negotiation of a new or updated trade agreement between Canada and the U.S. will significantly impact the loonie, potentially leading to weakness if those talks don’t go well.
“The only thing I’m watchful for is USMCA negotiations… that ultimately is the end goal for Trump’s administration. If those conversations start picking up and they don’t happen to go as well as last week, then that could start to add a little bit of volatility back into the Canadian dollar,” she said.
“But the second half of the year I think should be a great time for the Canadian dollar to rally.”
