- The US dollar initially did pull back a bit against the Canadian dollar, only to turn around and show signs of life.
- At this point in time, the market looks as if it is trying to sort out where it is going next, and I think that the next place is higher.
- You have to keep in mind, this happened in a day that had seen the US dollar get absolutely crushed, so that tells you just how weak the Canadian dollar is at the moment.
Ultimately, I think this is a scenario where you have to look at this through the prism of whether or not there is some type of run to safety and what's going on, more importantly, with the tariffs. The tariffs will continue to be the major driver in this pair.
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Reciprocal Tariffs. Nobody Cares.
While Canada is getting ready to do reciprocal tariffs, the Americans probably won't care. So, with that being the case, I think you've got a situation where this is probably one place where the US dollar probably continues to strengthen despite the fact that there are concerns about recessions. Because typically speaking, the Canadian economy does lose strength when the US economy slumps anyways, due to the fact that Canada sends almost all of its exports into the United States. At the end of the day, just the size of the economies will have a major influence on what happens next.
With that, I think this eventually gets worked out, but right now Canada has its back to the wall. And the only thing that can help it is if the Federal Reserve comes in and starts cutting rates, but if they start cutting rates aggressively, then you have to worry about whether or not there's going to be anybody there to buy lumber, oil, electricity, et cetera. There's also some thoughts that automotive manufacturers may leave Canada and come back to the United States. And as wild as that sounds, we've seen that happen from Mexico already. Honda just announced this yesterday. They will be producing 300,000 civics in the state of Indiana instead of Mexico. If that starts to happen to Canada, it is going to decimate the Ontario economy, which is the biggest one in Canada. So, watch this. This is a story that's very much in flux, but it still has more of an upward bias regardless.
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