CAD: US-Canada trade talks resume – ING

USD/CAD is settling back lower after a Friday spike led by President Trump walking away from trade negotiations with Canada, ING's FX analyst Francesco Pesole notes.

Markets may be underpricing Bank of Canada rate cut probability

"On Sunday, the Canadian Finance Minister, however, announced the withdrawal of the 3% big-tech tax that had prompted the US to walk from trade talks and Trump to threaten new tariffs. The two parties will restart negotiations with the aim of reaching a deal by 21 July."

"CAD’s rebound was relatively limited, signalling some lingering concerns on how smoothly negotiations can go from here – and crucially, how deep the agreement can go."

"While an ultimate deal can offer some short-term support to the loonie in the crosses, we remain unexcited with the currency’s longer-term prospects as tariffs are still having a material impact on Canadian growth, and markets may be underpricing Bank of Canada rate cut probability."