The USD/CAD pair remains under pressure in early Asian trading on Wednesday, hovering near 1.3715, as the Canadian Dollar (CAD) strengthens on the back of rising crude oil prices. Market focus now turns to the Bank of Canada’s (BoC) interest rate decision and the upcoming US ISM Services PMI report, both key events scheduled for later in the day.
The Canadian Dollar’s latest gains are underpinned by a renewed rally in oil prices, following confirmation that OPEC+ will maintain its scheduled production increase of 411,000 barrels per day (bpd) for July. As Canada is the largest oil exporter to the US, higher crude prices typically bolster the CAD due to improved trade terms and economic outlook.
In contrast, the US Dollar (USD) remains on the defensive amid mounting concerns over the Trump administration’s protectionist trade agenda. President Donald Trump’s move to double import tariffs on steel and aluminum takes effect Wednesday, alongside a broader push for trade partners to finalize deals by July 8. The tariff escalation has intensified investor caution, further weighing on the Greenback.
Adding to USD weakness, Federal Reserve officials on Tuesday expressed caution regarding monetary policy adjustments, citing heightened uncertainty stemming from trade tensions. The Fed‘s wary tone reflects concern over potential economic softness induced by the protracted US-China trade conflict.
Market participants are also awaiting the ISM Services PMI report for additional insight into the strength of the US economy. Meanwhile, the BoC is widely expected to hold interest rates steady, but the central bank’s forward guidance will be closely scrutinized for any signs of a policy shift in response to inflation dynamics and external headwinds.
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