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CAD is softer on the crosses following Trump's 'Liberation Day' tariffs.
A falling U.S. Dollar has sucked down the Canadian Dollar in the hours following the major tariff announcements out of the U.S.
CAD is up by half a per cent against its southern neighbour, but it is struggling against other major currencies, confirming the North American names are swimming in the same pool.
No new tariffs were announced for Canada and Mexico, with the White House saying it will deal with both countries through an already announced framework, which includes 25% tariffs with some exceptions.
This confirms an expectation that the Canadian Dollar might fly under the radar as other countries and their currencies bore the brunt of April 02's tariff announcements.
Given Canada's commission from new measures, we would have expected to see CAD perform better against the Euro and Pound as buyers stepped into the news void.
However, the pull of the Dollar is proving too great: the U.S. currency is down a per cent on Thursday, with investors betting on a protracted U.S. economic slowdown.
With the U.S. economy likely to slow, its closest trading partners will also struggle, and none are closer than Mexico and Canada.
The average U.S. tariff rate will rise to over 20% from just 2.5% before Trump took office, the highest level since the early 20th century.
The impacts on the U.S. economy are significant as a tariff is paid for by consumers and businesses, not by foreign countries seeking "to rip off" America, as Trump has so often alleged.
The implication is that the economy faces a significant shock in the form of higher prices. For Canada, the drop in U.S. demand will be significant and raises the very real prospect of a domestic recession.
"If the U.S. tariffs remain in place, Canada will undoubtedly fall into recession," says Stephen Brown, Deputy Chief North America Economist at Capital Economics.
"Against the backdrop of plunging immigration and poor productivity growth, the best-case scenario now is a sustained period of even weaker GDP growth than we previously expected. That means the Bank of Canada will cut interest rates again next week and loosen by more than we expected this year," he adds.
As markets digest the tariff news, the Pound-to-Canadian Dollar exchange rate is quoted 0.25% higher on the day at 1.8584. From a technical perspective, the pair is in a longer-term uptrend that will likely extend.
The Euro-to-Canadian Dollar is 0.40% higher at 1.5538, and is also in an uptrend. The U.S. Dollar-to-Canadian Dollar is 0.82% lower at 1.4135 and is attempting to break below a consolidation rate, which would seal the demise of a longer-term USD/CAD rally.