The Canadian Dollar (CAD) continued to falter on Thursday, marking its second consecutive day of losses against the US Dollar (USD), as the Greenback was broadly bid on growing optimism over potential trade deals from the Trump administration. The USD/CAD pair surged to a multi-week high near 1.3930, gaining over 1.23% in just two days, reflecting the growing divergence in trade trajectories between the US and its trading partners.

The markets were buoyed by headlines suggesting the US and UK are nearing a trade agreement to soften the impact of recently imposed “reciprocal” tariffs. While no official deal has been finalized, the mere prospect of progress has lifted sentiment and strengthened the USD across major currencies. However, the details are vague, and Trump’s rhetoric remains guarded, signaling that future deals with other nations may come with less favorable terms.

Canada, by contrast, remains at an impasse in its trade negotiations with the US. Canadian exports have not received notable tariff exemptions despite being a critical supplier of automotive parts, crude oil, and potash. The lack of movement is unsettling in the markets, especially with the June 9 grace period for reciprocal tariffs looming.

While the US granted UK exemptions on refined ethanol, it’s seen largely as symbolic—ethanol hasn’t been imported from the UK in over 15 years. The substance of the deals appears limited, yet they are succeeding in swaying market sentiment in favor of the USD for now.

Without concrete developments in US-Canada trade talks, and with commodity prices stabilizing, the CAD may remain under pressure, especially as the US Dollar capitalizes on policy and trade optimism.

Trade Idea:
Buy USD/CAD on dips toward 1.3880, targeting 1.4000, with a stop-loss below 1.3820, as trade divergence and tariff uncertainty weigh on the Loonie.