Canadian Dollar Slips as US Tariff Deadline Looms

The Canadian dollar gave back some of its recent gains on Tuesday, easing 0.2% to 1.39 per US dollar, after touching a more than two-month high of 1.3842 the previous day. The pullback came as investors weighed the prospects of a last-minute deal between Ottawa and Washington to avoid new tariffs on Canadian goods.

Prime Minister Mark Carney spoke with US President Donald Trump on Monday, according to Carney's office, as Canada seeks to avert 50% tariffs on about $20 billion worth of imports, set to take effect at midnight on Wednesday.

Strategists at Monex Europe noted that a durable deal could push the US dollar-Canadian dollar pair towards 1.37, while escalation risks could see it move back above 1.40 in the coming days.

Oil prices, a key Canadian export, rose 0.6% to $85.03 a barrel as hopes for a Middle East ceasefire receded, heightening concerns about prolonged supply disruptions.

On the domestic front, Canadian home sales rose for a fourth straight month in July, up 0.5% from June, with prices edging higher. "Canada's housing market is stabilizing, and we've probably found the floor for this long cycle," said Robert Kavcic, a senior economist at BMO Capital Markets. However, housing starts unexpectedly fell 5% in July compared with the previous month.

Canadian government bond yields eased by two to three basis points across the curve, though the 30-year yield had earlier touched its highest level since January 2010 at 4.173%. Globally, long-term borrowing costs in the US, Japan, and Germany rose to multi-decade highs, as renewed inflation worries and fiscal pressures weighed on bond markets.