CAD rebounds after tariff linked fears

The Canadian dollar (CAD) rebounded strongly on Tuesday, recovering 1.55% after earlier fears of US tariffs subsided. The US had threatened tariffs on Canadian goods, including a 25% levy on all goods and a 10% import fee on energy products. However, these threats were withdrawn for 30 days. This decision effectively postpones any immediate impact on approximately 60% of US fuel consumption and roughly 40% of vehicle purchases, which rely on Canadian products. The repeated delays of these tariff implementations suggest that future threats might be perceived as negotiation tactics rather than actual policy changes.

Market Drivers:

The CAD recovered significantly, pulling USD/CAD back into a familiar trading range.
US trade tariffs on Canada have been temporarily suspended for 30 days.
Market participants may now discount future tariff threats, reducing their potential impact.
Canadian labor data, including the Unemployment Rate (forecast to rise slightly to 6.8% from 6.7%) and Net Change in Employment (expected to decrease to 25K from 90.9K), is due on Friday.
US Nonfarm Payrolls (NFP) data, also due on Friday, is anticipated to show a decrease in net job gains to 170K from 256K, with potential for revisions to previous figures. The US NFP release is expected to overshadow the Canadian labor data.
CAD Outlook:

The CAD’s sharp recovery followed a brief push to near two-decade lows against the USD, with USD/CAD reaching close to 1.4800 before falling back below 1.4400. Despite the CAD’s gains, this move only returns USD/CAD to its established trading range between 1.4300 and 1.4500. Price action suggests continued consolidation within this range, characterized by short-lived fluctuations