The Canadian dollar remains under downward pressure near recent lows against the US dollar as of mid-June 2026, with escalating bilateral trade tensions now a primary driver of weakness. The United States has imposed tariffs on Canadian steel and aluminum, and Canada has answered with retaliatory measures on US goods, raising uncertainty for exporters in manufacturing and natural resources and prompting some investors to reduce exposure to Canadian assets. Earlier hotter-than-expected US inflation had already reinforced expectations that the Federal Reserve would keep policy restrictive for longer, while the Bank of Canada, after cutting its benchmark rate twice earlier, has held rates steady even as trade-related slowdown risks could foster a more dovish outlook and widen the interest-rate differential. The commodity-linked loonie is also sensitive to oil and other resource prices, though trade headlines and policy expectations have often dominated. A weaker currency can lift export competitiveness but raises import, travel and cross-border costs and may complicate the Bank of Canada’s return of inflation to its 2% target. Markets are watching trade negotiation headlines, economic data and signals from both central banks for the next major move in USD/CAD.