The USD/CAD pair remains largely unchanged at around the 1.4300 level as it attempts to recover from last Wednesday’s monthly low. Despite a modest bounce, the pair faces mixed cues, with spot prices holding above the 100-day Simple Moving Average (SMA), which offers key support but fails to trigger significant momentum.
The US Dollar (USD) continues to face downward pressure for the third consecutive day, driven by growing concerns over US President Donald Trump’s aggressive trade policies. These worries, coupled with the fear of a tariff-driven economic slowdown in the US, are fueling expectations that the Federal Reserve (Fed) may resume its rate-cutting cycle, which is keeping USD bulls on the defensive and weighing on the USD/CAD pair.
US Inflation Data Disappoints USD Bulls
Despite signs of rising inflation in the US, the USD has not gained traction. The US Personal Consumption Expenditure (PCE) Price Index, released on Friday, showed the core gauge (excluding volatile food and energy prices) rising by 0.4% in February, marking the largest monthly increase since January 2024. This pushed the annual inflation rate to 2.8%. Additionally, the University of Michigan’s survey revealed that 12-month inflation expectations reached their highest level in nearly 2.5 years in March. However, this data has not been enough to boost the USD, with markets instead focusing on the broader economic uncertainties linked to trade policies.
Risk-Off Sentiment and Tariff Concerns Limit USD/CAD Downside
The risk-off environment, amplified by Trump’s tariff announcements, has helped the USD hold steady. Last week, Trump imposed a 25% tariff on all non-American cars and light trucks, and further tariff hikes are expected on additional countries starting April 2. While these developments add to market uncertainty, the safe-haven appeal of the USD has kept the downside limited.
Meanwhile, concerns over global oil prices, linked to hopes for a Ukraine peace deal, have kept Crude Oil prices below recent multi-week highs. This undercuts the Canadian Dollar (CAD), which is typically sensitive to fluctuations in oil prices, further supporting the USD/CAD pair.
Caution Prevails for Traders
Given the ongoing uncertainty, traders are urged to remain cautious before betting on a resumption of the downtrend that the USD/CAD pair established from mid-March. Any significant developments in US trade policies or oil prices could dictate the next move for the pair, making it essential to monitor the market closely.
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