Canadian dollar stays weak on US trade risk

The latest market backdrop underscores that fragility. FXC, the Invesco Canadian Dollar Trust, has clawed back to about 70.43 after dipping below 69 in early July, but the broader trend still shows a currency that is struggling to break free of a narrow range. The Canadian dollar versus the US dollar was last around 0.72, little changed over the past several sessions, suggesting traders are not yet willing to price in a durable rebound.

At the same time, the dollar itself remains under pressure from shifting macro expectations. Adalytica’s US Dollar Trade Signals show “Extreme Fear” in the greenback, while the Chinese yuan sits in “Extreme Greed,” a sign that parts of the market are still leaning toward non-US currencies. Yet that has not translated into a strong bid for the Canadian dollar, which points to country-specific caution rather than a broad dollar story.

Commerzbank’s warning fits a wider macro picture in which trade policy, rather than interest-rate differentials alone, is increasingly driving FX performance. The latest US Treasury curve is still elevated, with the 10-year note near 4.64% and the 2-year around 4.13%, a level that keeps the dollar relatively well supported on yield grounds even as risk sentiment swings. For Canada, higher US yields can matter because they keep funding conditions tight and reinforce the appeal of US assets versus commodity-linked peers.

That leaves the loonie caught between two forces. On one side, a resilient North American economy and persistent demand for US assets limit upside. On the other, the possibility of fresh trade barriers or tariff rhetoric raises the risk of slower Canadian exports, weaker business investment and a softer Bank of Canada policy path than investors might otherwise expect.

For investors, the key question is whether the currency can decouple from trade headlines. A sustained improvement would likely require either a clearer easing in US-Canada trade tensions or a more decisive shift in global growth that boosts commodity-linked currencies. Without that, rallies in the Canadian dollar may continue to look tactical rather than structural.