The USD/CAD pair surged at the start of the week, rising to the 1.4040 region during the Asian session and breaking a three-day losing streak. The rally was fueled by a broad uptick in US Dollar (USD) demand, driven by growing concerns over US President-elect Donald Trump’s tariff plans.
Trump’s proposals to impose tariffs on the BRICS nations (Brazil, Russia, India, China, and South Africa), along with his pledges of significant tariffs on the US’s top trading partners—Mexico, Canada, and China—have heightened market uncertainty. These developments could push consumer prices higher and prompt the Federal Reserve to halt its rate-cutting cycle, fueling an increase in US Treasury bond yields and boosting the USD.
While Crude Oil prices saw a modest rise, it failed to offer much support to the Canadian Dollar (CAD), a commodity-linked currency. The broader market sentiment remains dominated by concerns over Trump’s tariff strategies, overshadowing any positive movement in oil markets.
Given the current market backdrop, the path of least resistance for USD/CAD seems to be to the upside. However, traders are likely to remain cautious ahead of key US economic data this week, including the ISM Manufacturing PMI release later on Monday and the highly anticipated Nonfarm Payrolls (NFP) report on Friday.
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