Canada: Recession concerns and USMCA talks – Rabobank

FXStreet Insights Team FXStreet

Rabobank strategist Molly Schwartz notes that Canada has entered a technical recession, with Gross Domestic Product (GDP) contracting for two consecutive quarters and missing expectations. Prime Minister Carney and Bank of Canada (BoC) officials downplay the downturn, while trade tensions and USMCA renegotiation loom. Schwartz stresses that sectoral tariffs and renewed terms with the United States (US) and Mexico will be critical for Canada’s economic outlook.

Technical recession and trade pressures

"While innovation in the US is so hot that the government is now pulling in the reins a bit, officials in Canada are turning a blind eye to sluggish growth."

"Last week it was announced that Canadian GDP shrunk by 0.1% in Q1 of 2026, marking the second consecutive quarter of contraction and signalling a technical recession."

"Bank of Canada Deputy Governor, Carolyn Rogers, has also brushed off the technical recession, saying that we need to “look past technical recession indicators” in favor of more leading economic indicators."

"But for some, the technical recession is a flashing red light, screaming that the current trade situation with the US is unsustainable and it’s time to sit down at the negotiating table."

"Prior to their sit down, LeBlanc sent a letter to both Greer, and Mexico’s economy secretary Ebrard, asking to see the USMCA renewed for another sixteen years, as the USMCA review is currently underway."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)

Author

FXStreet Insights Team

FXStreet

The FXStreet Insights Team is a group of journalists that handpicks selected market observations published by renowned experts. The content includes notes by commercial as well as additional insights by internal and external analysts.

AUD/USD consolidates above 0.7200; US NFP awaited

AUD/USD holds steady above 0.7200, near its highest level since mid-May, as bulls await the US NFP report for more cues on the Fed's policy path before placing fresh bets. Meanwhile, the recent decline in US bond yields keeps the US Dollar depressed near its lowest level in over a week and acts as a tailwind for the Aussie amid the RBA's hawkish tilt.

USD/JPY eyes August swing low, near 155.20 ahead of US NFP

USD/JPY retests the August monthly swing low during the Asian session on Friday as a more hawkish repricing of BoJ rate-hike bets and a suspected intervention continue to underpin the Japanese Yen. Meanwhile, the US Dollar is seen consolidating the previous day's heavy losses amid soft US bond yields, further weighing on the currency pair as traders keenly await the US NFP report.

Gold tumbles as blockbuster US NFP lift US Dollar, Treasury yields

Gold (XAU/USD) falls sharply on Friday, snapping a two-day recovery after the US Nonfarm Payrolls (NFP) report surprised strongly to the upside. The metal briefly climbed above $4,500 on Thursday, gaining nearly 2%, but has since erased a large part of that advance.

The week ahead: Dollar at a crossroads as CPI and ECB take centre stage

With the summer finally over, investors returned with a strong appetite for action. Following last week’s strong performance, the US dollar has taken a back seat so far this week, as oil, the yen and sovereign bond yields monopolized market interest.

CFTC report: Oil rebound offsets broader positioning retreat

The week in one sentence: Speculative positioning became more defensive in the week ending September 1. Yen short positioning recorded the largest deterioration, while Gold length also retreated. Oil buying returned alongside stronger prices, and Canadian Dollar and Euro positioning improved, although Euro flows diverged from weaker spot prices.

Diesel’s record $100 warning: The oil shock hiding in plain sight

The Oil market may look calmer than it did a few months ago, but diesel is sending a very different message. The US diesel crack spread, the premium of ultra-low sulphur diesel futures over WTI, recently surged above $100 per barrel for the first time, reaching an intraday record of just over $102.00.