The USD/CAD pair surged to 1.4518 before sharply pulling back to 1.4445 during the Asian trading session on Tuesday. The Canadian Dollar (CAD) weakened following comments from US President Donald Trump regarding potential tariffs on Canada. The Canadian December Consumer Price Index (CPI) inflation data will be the focus later in the day.
On Monday, Trump stated that he was considering imposing 25% tariffs on imports from Canada and Mexico, citing concerns about border crossings and the fentanyl crisis. He added that the tariffs could be implemented as soon as early February, stating, “We’re thinking in terms of 25% (levies) on Mexico and Canada because they’re allowing a cast number of people” over the border.
BoC Survey Shows Subdued Economic Sentiment, CPI Data in Focus
The Bank of Canada’s (BoC) Business Outlook Survey highlighted that while Canadian firms expect improved demand and sales in the coming year, concerns remain over the potential risks posed by Trump’s trade policies. These concerns have led to a subdued overall economic sentiment in Canada.
Investors are awaiting Canada’s December CPI inflation data, with expectations of a 1.8% year-on-year increase, slightly down from the 1.9% recorded in November. A stronger-than-expected CPI report could support the Canadian Dollar and limit the upside potential for USD/CAD.
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