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Commerzbank Sees Canadian Dollar Remaining Sensitive to US Trade Developments

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The Canadian dollar is likely to remain heavily influenced by trade developments with the US in the weeks ahead, following President Donald Trump's latest tariff measures on Canadian goods, according to Commerzbank in a Tuesday note.

Although the Canadian dollar's initial reaction to Monday's White House new tariff announcement was relatively muted, the US trade dispute will drive the Canadian dollar Outlook, said the bank.

"Given the multitude of threats Donald Trump has made in recent months - not all of which have been carried out - the muted reaction seems reasonable for now," wrote Commerzbank FX and Commodity Analyst Volkmar Baur in the note.

That said, the move introduces renewed uncertainty for the Canadian dollar, with the loss of preferential treatment for affected products under the US-Mexico-Canada Agreement potentially weighing on exports and keeping trade tensions in focus for currency markets, he added.

Using Section 338 of the Tariff Act of 1930, the US administration accused Canada of unfairly discriminating against American products in sectors including dairy, alcoholic beverages and autos. The affected goods will lose USMCA exemption eligibility, with the new tariffs set to take effect in 30 days.

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