The Canadian dollar CADUSD edged lower against its U.S. counterpart on Friday as domestic data showed retail sales declining in the first two months of 2025 and tariff uncertainty lingered, but the currency was holding on to a modest weekly gain.
The loonie was trading 0.1 per cent lower at 1.4340 per U.S. dollar, or 69.74 U.S. cents, after trading in a range of 1.4314 to 1.4373. For the week, the currency was up 0.2 per cent, which would be its third straight weekly gain.
The Canadian dollar is likely to continue trading in a somewhat flat range for now “as markets await clarity” on proposed U.S. tariffs, Shaun Osborne, chief currency strategist at Scotiabank, said in a note.
Wall Street clawed back some of its declines after U.S. President Donald Trump hinted there would be some flexibility regarding tariffs.
Trump has promised tariffs on autos beginning April 2, alongside a more sweeping agenda of reciprocal tariffs. Earlier this month, he suspended until April 2 tariffs of 25 per cent he had imposed on most goods from Canada.
“In terms of the implications for Canada, misery loves company,” Avery Shenfeld, chief economist at CIBC Capital Markets, said in a note.
“Both the impacts on our exports to the US, as well as our odds of negotiating these tariffs down to a manageable size, would be improved by having many other US trading partners in the same boat.”
Canadian retail sales shrank 0.6 per cent month-over-month in January after December’s purchases were bumped up by a sales tax break which ended in the middle of last month. A preliminary estimate for February showed sales down 0.4 per cent.
The Canadian 10-year yield was trading nearly unchanged at 3.016 per cent, while it was trading 1.3 basis points further above the 2-year yield at a spread of 49.6 basis points, its widest since February 2022.