Key moments

• CAD experienced increased volatility on Thursday as market participants reacted to the shifting landscape of U.S. tariff policies.
• In intraday trading, CAD briefly surged by 0.7% against the USD before settling to a gain of approximately 0.2%.
• The USD/CAD pair approached its 50-day Exponential Moving Average (EMA) at the critical 1.4300 price level.

Canadian Dollar Gains 0.2% Against the Greenback

The Canadian dollar exhibited notable fluctuations on Thursday, reflecting the market’s ongoing struggle to interpret the implications of the U.S. administration’s evolving tariff policies. CAD’s movement was characterized by a push towards higher valuations, although gains were subsequently moderated.

The day’s trading saw the Canadian Dollar respond to wavering confidence in the US dollar, a direct consequence of the persistent ambiguity surrounding trade tariffs imposed by the United States. Notably, the Canadian Dollar briefly surged by 0.7% against the US Dollar before settling to a gain of approximately 0.2%.

The USD/CAD trading pair experienced a significant test, with its value descending to the 50-day EMA at the 1.4300 price handle. This level has historically served as a point of congestion for the Loonie, indicating its importance in the market.

Looking at broader market data, the Canadian Ivey Purchasing Managers Index (PMI) for February exceeded expectations, reaching a seven-month high of 55.3, compared to the forecasted 50.9. This positive data point, up from January’s 47.1, suggests strengthening Canadian economic activity. However, the potential impact of U.S. trade tariffs on Canadian growth remains a key concern.

The U.S. side of the economic picture also contributed to market dynamics, with the Challenger Job Cuts report revealing multi-year highs. This development has sparked caution ahead of the release of the US Nonfarm Payrolls (NFP) report.

President Trump’s decision to grant a 30-day extension on import tariffs for the U.S. automotive industry, coupled with indications of further exemptions and extensions, has added to the market’s uncertainty. While markets are growing weary of the frequent shifts in tariff implementation, the potential for trade-related disruptions continues to influence currency valuations.

The Loonie’s recent activity suggests that while it is capable of making upward movements, it remains vulnerable to the broader economic and political climate. Until greater clarity emerges regarding trade policies and economic outlooks, the USD/CAD pair is likely to continue trading within a rocky range.