Canadian Dollar Update, August 7, 2020 – Canadian Dollar facing US Tariff wars
USD/CAD Open: 1.3361-65, Overnight Range: 1.3281-1.3398
WTI Oil is at $41.41 and gold is at $2,040.80. US markets are lower today.
For today, USD resistance is at 1.3425. Support is at 1.3337.
• Trump slaps tariffs on Canadian aluminum
• Trump targets Chinese tech companies, equity indexes slide
• US dollar climbs ahead of Canadian and US employment reports
President Trump is desperate. At least it looks that way. The US election is less than three months away, and Trump is trailing Democrat candidate Joe Biden by as much as 12% in the latest Ipsos poll. China and trade were the two themes that got him elected in 2016, and he is reusing that playbook today.
Last night, Trump signed executive orders barring US citizens from transactions with the owners of Tik Tok and WeChat apps. The Americans believe that these two apps provide Beijing with access to personal data, which they could exploit for nefarious purposes. Trump claims Tik Tok poses an economic and national security threat. China is not impressed, and the escalation in tensions between the two nations sparked a bit of “risk-off” trading.
President Trump attacked Canada again. He announced 10% tariffs on imports of aluminum from Canada. He said “Earlier today I signed a proclamation that defends American industry by reimposing aluminum tariffs on Canada. Canada was taking advantage of us, as usual. The aluminum business was being decimated by Canada, very unfair to our jobs and our great aluminum workers.”
Canada deputy prime minister Chrystia Freeland said the tariffs were unwarranted and unacceptable.
Justin Trudeau said that Canada would impose retaliatory tariffs on a “dollar-for-dollar” basis.
USDCAD largely ignored the tariff news but rallied, thanks to broad US dollar demand against the majors. China trade tensions supported prices, but profit-taking ahead of today’s US employment report was the primary reason for the rally.
The US data will overshadow today’s Canadian employment news. Canada added 419,000 jobs in July. It is well below June’s 952,000 increase, but the trend is positive. Nevertheless, the employment report will be ignored as it will not have any impact on near-term Bank of Canada policies.
The overnight surge in the US dollar prevented gold (XAUAUD) and oil prices from adding to this week’s gains.
Gold prices continue to be supported by geopolitical tensions and low interest rates in the major economies.
Today’s Suggested Range USD/CAD: 1.3310 – 1.3410