MUFG’s Senior Currency Analyst Lee Hardman highlights that the Canadian Dollar has underperformed after stronger US data, lagging other high-beta currencies as USMCA renegotiation risk resurfaces. Reports that President Trump is considering exiting or revising USMCA raise potential tariff and trade uncertainty, posing downside risk for the Canadian Dollar and Mexican Peso over coming months, though market scepticism may limit losses.

Trade pact uncertainty pressures Canadian Dollar

"The Canadian dollar has underperformed over the last 24 hours even after the latest nonfarm payrolls report has helped to ease downside risks for the US economy."

"The underperformance of the Canadian dollar reflects the re-emergence of trade policy risks for Canada."

"The pick-up in trade policy was triggered by a report from Bloomberg stating that President Trump is privately weighing musing about exiting the USMCA trade pact he signed up to during his first term in office."

"The USMCA trade agreement is set for a mandatory review before a possible extension on 1st July."

"A threat from President Trump to withdraw from the USMCA trade deal poses downside risk for the Canadian dollar and Mexican peso in the coming months, although scepticism over whether he will follow through should help limit downside"

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)