USD/CAD gives up intraday gains as USD's recovery trims

• USD/CAD falls back and turns flat as the recovery move in the US Dollar has shortened.
• US Trump has expressed confidence that trade talks with Mexico and Japan went smoothly.
• The BoC has warned that a long-lasting global trade war could push the economy into a deep recession.

The USD/CAD pair surrenders its intraday gains and falls back to near 1.3860 during North American trading hours on Thursday. The Loonie pair retreats as intraday gains in the US Dollar (USD) have trimmed, even though United States (US) President Donald Trump has signaled that Washington is making decent progress in closing bilateral deals with Japan and Mexico.

The US Dollar Index (DXY), which tracks the Greenback's value against six major currencies, falls slightly from its intraday high of 99.60 to near 99.45.

"Had a very productive call with the President of Mexico yesterday. Likewise, I met with the highest-level Japanese Trade Representatives. It was a very productive meeting. Every Nation, including China, wants to meet! Today, Italy! US President Donald Trump wrote in a post on Truth.Social platform in late European trading hours on Thursday. 

On Wednesday, the Bank of Canada (BoC) left interest rates steady at 2.75%, as expected, and warned that a potential spike in inflation due to a potential Trump-led global trade war could push the economy into a "deep recession". The BoC didn't release its economic forecast but provided two scenarios amid uncertainty over how Trump's tariff policy will shape the Canadian economic outlook.

In the first scenario, if the majority of tariffs are negotiated away, the Canadian and global growth would weaken temporarily. Inflation might fall to 1.5% for a year and then return to the central bank's 2% target.

In the second scenario, a long-lasting global trade war will push the economy into a significant recession, and inflation will spike above 3% in mid-2026 before returning to 2%.