The USD/CAD pair is trading in positive territory around 1.3880 during Thursday’s early Asian session, though its upside potential may be capped by growing trade uncertainties. Traders are closely monitoring developments in US trade talks with key trading partners, which could have significant implications for market sentiment.
Federal Reserve (Fed) Chairman Jerome Powell warned on Wednesday that ongoing trade tensions could undermine the central bank’s goals of achieving full employment and stable inflation. Powell noted that US economic growth appears to be slowing, with modest consumer spending, a surge in imports to avoid tariffs, and a dip in sentiment. The market anticipates that the Fed will resume rate cuts in June, with expectations that the policy rate, currently in the 4.25%-4.50% range, will be reduced by a full percentage point by the end of the year.
In the US, Retail Sales rose by 1.4% in March, exceeding the forecasted 1.3% and building on February’s 0.2% increase. Despite the better-than-expected data, the US Dollar did not see significant gains, as traders remain cautious, awaiting outcomes from trade negotiations led by US President Donald Trump’s administration.
Meanwhile, the Bank of Canada (BoC) held its benchmark interest rate steady at 2.75% in its April meeting, marking the first pause after seven consecutive rate cuts. The BoC cited uncertainty around US tariffs as a key factor preventing it from issuing regular economic forecasts. Market expectations now suggest nearly a 50% chance the BoC will resume rate cuts at its next meeting in June, with two additional reductions anticipated by the end of 2025.
Related Topics:
