The Canadian Dollar (CAD) has softened in response to news of reciprocal tariffs on imported steel and aluminum to the US. Canada is one of the US’ top suppliers, particularly for quality grades, with sales representing about 5% of total exports to the US, Scotiabank's Chief FX Strategist Shaun Osborne notes. 

CAD underperforms on the day

"There are meaningful consequences for both countries. The CAD slipped back to the upper 1.43s in early Asian trade but has since recovered about half of that loss to steady in the low/mid-1.43s as markets await developments. Friday’s Canadian employment report reflected another decent gain in jobs in January and a very solid (0.9%) rise in hours worked across the economy which suggests firm growth momentum in early 2025 despite the hyper-focus on tariffs." 

"While tariff concerns remain paramount for policymakers right now, evidence of very firm growth momentum late last year and into Q1 suggest the Bank can afford to await developments before judging whether more accommodation is needed. Odds of a March cut have been pared back to 60/65% or so—this time last week, market pricing was veering towards the chance of an off-cycle cut. USDCAD continues to trade close to, but a little below, estimated fair value (1.4387 today)." 

"Chart signals wound up net bearish for the USD over last week. Spot developed a bearish 'engulfing' line on the weekly candle chart and a key reversal week in 'regular' chart analysis. Noted support at 1.4250/75 remains relevant for the USD as the recent lows for the USD coincide with the 38.2% retracement of the USD’s Sep/Jan rally (1.4260). A push below the upper 1.42 area targets a further USD drop to the 1.40/1.41 area. Resistance is 1.4375/80, where the USD topped out overnight, and 1.4450/75."