Loonie holds steady amid fresh US-Canada trade tensions

The trade conflict between the US and Canada escalated further over the weekend. Donald Trump issued a series of provocative posts, including one referencing hockey in which he wrote "Get up Governor". That led to the US president announcing a ban on Bombardier aircraft. The manufacturer of Challenger and Global business jets also drew Trump's attention last year over the slow certification of American jets in Canada.

The move appeared unusual given that Bombardier works with more than 2,800 suppliers in the US. According to Bloomberg, the Global 7500 jet has wings built in Texas, avionics from Iowa and motors from Indiana.

Meanwhile, Canada's retaliatory tariffs on US goods took effect today, with rates ranging from 15% to 50% on hundreds of products.

Another odd move from Trump was a swipe at the Canadian dollar.

“Canada’s (currency) Dollar imbalance with the U.S. is unacceptable. It has been that way for years — but no longer!”

It appears Trump believes that because Canada calls its currency the 'dollar', the two should trade at 1:1.

Despite all this, the Canadian currency is showing little reaction today, in a growing sign that markets are ignoring the president. USD/CAD has slipped 7 pips to 1.3807 and has generally moved lower since tensions rose last month.

On both the daily and longer-term charts, the downtrend may overstate the loonie's stability. That is because while Trump has been feuding with Canada, he has also stepped up the conflict with Iran. That has lifted oil prices to their highest level since June. On a technical basis, the WTI chart is showing a potentially dangerous breakout.

Oil has climbed $2.45 to $93.93 today after the US fired on three tankers headed to Iran and Iran hit US bases. Houthi rebels in Yemen also struck Saudi Arabian energy infrastructure.

For today, the North American economic calendar is empty and the Fed is in its blackout period, so attention will be on Trump and any further escalation against Canada. A good gauge of how seriously the market takes the threats will be shares of Bombardier, which have rallied spectacularly since the pandemic, returning nearly 50 times.