The USD/CAD pair is making a modest recovery from recent losses, trading near 1.4330 during Asian hours on Friday. The US dollar (USD) finds support from safe-haven demand as global trade tensions rise, fueled by US tariff policies.
Fed Policy and Economic Indicators
Federal Reserve Chair Jerome Powell played down the inflationary impact of tariffs, describing it as temporary, though he acknowledged broader economic uncertainties. While recession risks have grown, Powell maintained that they remain relatively low.
On the economic front, US Initial Jobless Claims for the week ending March 15 came in at 223K, slightly below the expected 224K but surpassing the previous week’s revised 221K figure. Meanwhile, the Philadelphia Fed Manufacturing Survey for March fell to 12.5 from February’s 18.1, marking the second consecutive monthly decline, though it remained above the forecasted 8.5.
Canadian Dollar Pressured by Political and Trade Concerns
The Canadian dollar (CAD) faces headwinds due to rising investor uncertainty, particularly surrounding the country’s political landscape. Reports indicate that newly appointed Prime Minister Mark Carney may call a snap election on April 28, raising concerns over policy stability.
Adding to the pressure, US President Donald Trump has escalated trade tensions by threatening new tariffs on Canadian imports, compounding the impact of existing duties on steel and aluminum.
Furthermore, the Bank of Canada’s (BoC) recent decision to cut interest rates to 2.75% has widened the yield gap with the Fed, increasing capital outflows and weighing on the CAD.
With these factors in play, USD/CAD traders will closely monitor further developments in US-Canada trade relations and upcoming central bank policy signals.
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