Market Wire: Canadian Dollar Spikes Higher on Tariff Postponement

Currency markets are experiencing another bout of whiplash after a telephone conversation between Canadian Prime Minister Justin Trudeau and US President Donald Trump resulted in a 30-day postponement to tonight’s tariff deadline. The Canadian dollar is up a little over 100 basis points as we go to print, and is effectively flat relative to Friday’s open.

In a post on Twitter, Trudeau said “I just had a good call with President Trump. Canada is implementing our $1.3 billion border plan — reinforcing the border with new choppers, technology and personnel, enhanced coordination with our American partners, and increased resources to stop the flow of fentanyl. Nearly 10,000 frontline personnel are and will be working on protecting the border”.

“In addition,” Trudeau said, “Canada is making new commitments to appoint a Fentanyl Czar, we will list cartels as terrorists, ensure 24/7 eyes on the border, launch a Canada-U.S. Joint Strike Force to combat organized crime, fentanyl and money laundering. I have also signed a new intelligence directive on organized crime and fentanyl and we will be backing it with $200 million. Proposed tariffs will be paused for at least 30 days while we work together.”

Trump earlier agreed to delay implementing tariffs against Mexican imports after Mexican President Claudia Sheinbaum agreed to send 10,000 troops to the border. It remains unclear if this number comes on top of the 15,000 who were sent under a 2019 agreement that played out under similar circumstances.

As has become routine in the last few weeks, we would caution that the situation remains vulnerable to sudden changes, but it does appear that—for now at least—the threat of a catastrophic blow to the Canadian economy has been lifted.

We expect further currency gains to play out in the coming days, but note that the relief rally can only extend so far: investment and sentiment levels in Canada have taken a severe hit, and it is unclear just how long today’s reprieve will last. Traders will remain prepared for asymmetric downside risks in the US dollar-Canada pair for now.