Canadian dollar weakens as BoC cuts and tariff fears weigh

The Canadian dollar fell below 1.44 per USD, approaching the nine-year low of 1.45 seen on January 17th, as investors reacted to the Bank of Canada's widely anticipated 25bps rate cut, compounded by growing concerns over U.S. tariffs.

Canadian dollar weakens as BoC cuts and tariff fears weigh

The widening interest rate differential between Canada and the U.S. is putting additional strain on the loonie, with the U.S. Federal Reserve expected to maintain steady interest rates later in the day. Meanwhile, trade tensions resurfaced following a dispute between the U.S. and Colombia over the weekend. White House spokesperson Karoline Leavitt confirmed on Tuesday that former President Trump still intends to impose tariffs on Canada and Mexico starting February 1st and is also considering additional tariffs on China.

Fears of US tariffs

This has sparked concerns about trade disruptions with Canada’s largest trading partner, which could reduce foreign exchange inflows. Adding to the pressure, falling crude oil prices—vital to Canada’s economy—have intensified fears that tariffs on Canada, Mexico, and China could negatively affect global energy demand and economic growth.