US FX WRAP: Loonie lags as Trump announces new Canadian tariffs

The Dollar Index saw strength on Monday, and gained, albeit to varying degrees, against G10 FX peers. The Loonie was the G10 laggard, and came as US President Trump formally announced new 50% tariffs on Canadian autos, auto parts and steel from 1st January 2027. Elsewhere, the most notable headlines were on the US/Iran footing and the accompanying Treasury Secretary Bessent press conference in otherwise thin newsflow. Briefly recapping, Bessent announced Operation Economic Outcast on the Iranian economy, and threatened any further enablers of the Iranian economy. In the US morning, CNBC reported that Bessent could tap near USD 1tln treasury general account to fund bond buybacks, which garnered slight weakness in the Buck. There was no tier 1 US data or Fed speak on Monday, with the highlights this week being Nvidia earnings (Wed) and Fed Chair Warsh at Jackson Hole (Fri).

As mentioned, aside from the lagging Loonie, losses across G10 peers vs. the Dollar were more contained. GBP and EUR saw slight losses, while Antipodeans were the next worst performers, although in pretty thin currency-specific newsflow and more trading off the wider risk tone. For the single-currency Euro, ECB's Cipollone said that monetary policy needs to be well calibrated; inflation is far from adverse & severe scenarios and that there are no signs pointing to a scenario of stagflation.