The Canadian dollar weakened sharply past 1.44 per USD, approaching the nine-year low of 1.45 touched on January 17th, as U.S. President Trump’s initial executive orders cast a shadow over Canadian foreign exchange inflows. Trump announced plans to impose tariffs of up to 25% on Canada by February 1st, citing illegal border crossings as justification. These tariffs are expected to significantly curtail demand from Canada’s largest export destination, straining dollar inflows. Adding to the pressure, Trump’s emphasis on bolstering U.S. domestic energy production threatens to undercut Canadian energy exports by forcing producers to lower selling prices. On the domestic front, inflationary pressures eased, with headline inflation slipping to 1.8% in December, below the anticipated 1.9%. Additionally, the Bank of Canada’s preferred inflation measure aligned with forecasts at 2.5%, reinforcing market expectations of further rate cuts this year to counter mounting growth concerns.
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