Overview
The Canadian dollar edged lower on Tuesday as a retreat in oil prices offset data showing Canada recorded its fourth consecutive monthly trade surplus. The loonie traded 0.2% softer at 1.4070 per U.S. dollar, equivalent to 71.07 U.S. cents, after touching an intraday low of 1.4076 - its weakest level since last Wednesday.
Trade and growth data
Statistics Canada reported a trade surplus in June of C$3.86 billion ($2.75 billion), the largest monthly surplus in four years. The report noted that a weaker Canadian dollar lifted the value of both exports and imports. Economists had expected a smaller surplus of about C$3 billion.
Preliminary figures also pointed to a notable pace of economic growth in the second quarter, with annualized expansion estimated at 3.4%.
Commentary from economists
"June’s data confirm that a further rebound in export volumes from the lows seen in 2025 appears to have been a large driver of the strength in GDP signalled for Q2," Andrew Grantham, senior economist at CIBC Capital Markets, said in a note. "However, with the threat of new tariffs looming, this surge in exports could easily slow or stall ahead."
Manufacturing and external demand
Separate data released on Tuesday showed Canada’s manufacturing sector expanded in July at the fastest pace in more than four years. The pickup was driven by stronger domestic activity that boosted production and new orders. At the same time, weak international demand was highlighted as a potential constraint on how sustainable this improvement will be.
Oil market influence
Oil, a key Canadian export, fell sharply, losing 5.7% to settle at $75.80 a barrel. The drop followed comments from Qatari and U.S. officials that raised hopes for a diplomatic resolution to the Iran war and the potential for improved oil flows through the Strait of Hormuz.
The fall in oil prices was a primary headwind for the Canadian dollar on the day, offsetting some of the positive implications of a wider trade surplus and stronger domestic manufacturing activity.
Context and outlook considerations
While the June trade surplus and preliminary GDP figures point to momentum coming from export and domestic activity, the outlook contains notable uncertainties. New tariffs announced by the U.S. on nearly $20 billion of Canadian goods last month and weaker foreign demand for manufactured goods are cited factors that could temper the recovery in exports and production.