Canadian Dollar backslides on fresh risk aversion

• The Canadian Dollar tumbled against the US Dollar on Tuesday.
• After a long weekend, American markets have returned with a notable risk-off tilt.
• PMI figures for both US and Canadian markets revealed increasing business concerns around tariffs.

The Canadian Dollar (CAD) took another backstep against the US Dollar (USD) on Tuesday, officially kicking off the September market window with a firm step into the bearish side as risk appetite withers.

Global markets are facing renewed concerns about government financing and debt levels, as well as knock-on inflation impacts from the Trump administration's ever-changing tariff policies. Businesses and firms in the manufacturing sector broadly reported an upswing in earnings through the third quarter, but mostly on the back of price increases as inventories eat of supplies at an increased pace.

Daily digest market movers: Fresh market concerns knock Canadian Dollar lower

• The Canadian Dollar fell over one-half of one percent at its lowest against the US Dollar on Tuesday, before recovering to a more stable 0.2% decline.
• Investor risk appetite faces a challenge in September as government budget deficits swell across developed economies and tariff impacts continue to grow.
• The Institute for Supply Management (ISM) noted that respondents to their latest Purchasing Managers Index (PMI) noted that price gains are a result of demand outstripping supplies, with firms reticent to engage in hiring.
• Many firms are noting sharp contractions in new orders, especially among businesses that deal with imports from Brazil and India, especially in the agriculture and construction materials segments.
• The Standard & Poor's (SP) Canadian PMI reported a general softening in Canadian manufacturing declines, but Canadian firms continue to grapple with tariff effects, and are struggling to readjust supply chains in the face of souring trade with the US.

Canadian Dollar price forecast

Tuesday's bearish plunge in the Canadian Dollar has bolstered USD/CAD bids, sending the pair back into the 50-day Exponential Moving Average (EMA) as bullish pressure behind the Loonie dries up. A sharp adjustment to global risk appetite to kick off September has sent the safe-haven US Dollar higher, and USD/CAD is now challenging the 1.3800 once again.

USD/CAD remains fairly contained below the 200-day EMA near 1.3875, but further downside remains equally unlikely after a soft double-bottom from the 1.3730 region.

USD/CAD daily chart