Loonie Stabilizes as Canada Rescinds Digital Services Tax

The Canadian dollar stabilized around 1.367 per USD after Canadian Finance Ministry announced late on Sunday that it is rescinding a digital-services tax in a bid to advance stalled trade negotiations with the US. The move comes after US President Donald Trump abruptly called off talks on Friday over the tax targeting American tech firms. The Finance Ministry added that leaders from both countries will resume negotiations to agree on a deal by July 21. Despite this positive development, the Canadian dollar’s upside remains limited. Easing geopolitical tensions in the Middle East have pushed oil prices lower, stripping the loonie of a key terms-of-trade support pillar. Sentiment was further weighed down by disappointing economic data. Canada’s GDP contracted by 0.1% in April, with preliminary estimates pointing to a similar decline in May. This puts the economy on track for a modest contraction in the second quarter, as activity continues to be dampened by tariff uncertainty.