The Canadian dollar strengthened against its U.S. counterpart on Wednesday, extending its rebound from a one-month low, as investors weighed prospects of Canada's receiving some relief from U.S. tariffs.

Loonie markets are recovering ground as the Trump administration begins to pivot away from its own tariff policies. Key labor data still looms large at the end of the week with Canadian employment figures and another round of US Nonfarm Payrolls net jobs additions.

A significant impact on Canada's foreign investment inflows could potentially compromise economic growth, creating a bearish outlook for the loonie”

The Canadian dollar weakened to a one-month low against its U.S. counterpart on Monday as U.S. President Donald Trump said that tariffs on Canada and Mexico will go into effect on Tuesday, denting hopes of another reprieve.

Price action in the Mexican peso and Canadian dollar suggests markets are hopeful U.S. tariffs won't remain in place for long, MUFG Bank's Lee Hardman said in a note. The initial falls in the two currencies look relatively modest given the scale of tariffs,