Canadian Dollar gives away gains amid lower oil prices, fresh trade tensions

The Canadian Dollar (CAD) lost recent gains against the US Dollar (USD) on Wednesday due to falling oil prices and heightened trade tensions with the United States. The USD/CAD pair tested the top of the weekly range at 1.3867, after dipping to 1.3825 the day prior. Investors are closely watching the US Personal Consumption Expenditures (PCE) Price Index release, which is expected later that day.

Trade tensions resurfaced between the US and Canada after Canadian Finance Minister Francois-Philippe Champagne announced tariffs of up to 50% on numerous US products, retaliating against US levies following negotiations' failure. In response, US President Donald Trump threatened additional tariffs on Canadian vehicles, trucks, auto parts, and steel.

Meanwhile, oil prices, Canada's primary export, are trading lower, currently at $85.70, nearly 8% below last Friday's highs above $93.00. Meanwhile, news that Iran and Oman are negotiating to reopen the Strait of Hormuz is weighing on crude prices, though the waterway remains largely closed after six months of conflict. With limited appetite for large directional bets on the US Dollar ahead of upcoming economic data releases, the Canadian Dollar remains vulnerable.