USD/CAD strengthens as momentum grows among Trump’s advisers to impose 25% tariffs on Canada, potentially starting February 1.
The CAD also struggles as the BoC is expected to implement another 25 basis points rate cut on Wednesday
The US Dollar gains ground amid uncertainty surrounding the impact of President Trump's policies.
USD/CAD recovers its losses from the previous two sessions, trading around 1.4390 during the Asian hours on Monday. This upside of the pair is attributed to the growing momentum among US President Donald Trump’s advisers to place 25% tariffs on Mexico and Canada as soon as February 1.
In a gated story, the Wall Street Journal (WSJ) reported on early Monday that Trump’s advisers do not want to wait for any negotiations or talks. An unnamed 'Senior administration official' in the report said Trump is willing to move quickly, citing the President’s imposition of tariffs on Colombia.
Additionally, the (CAD) faces pressure as the Bank of Canada (BoC) is expected to implement another quarter-point rate cut on Wednesday, while the Federal Reserve is widely anticipated to hold interest rates steady through the first half of the year, further widening the interest rate differential.
The US Dollar gains ground due to uncertainty surrounding the impact of US President Donald Trump's trade could support the US Federal Reserve's (Fed) cautious approach to cutting interest rates this year.
The US Dollar Index (DXY), which measures the value of the US Dollar (USD) against its six major peers, recovers from its monthly low of 107.22, reached on Friday. The DXY trades near 107.60 at the time of writing.
Data released by S&P Global on Friday showed that the US Composite PMI declined to 52.4 in January from 55.4 in December. Meanwhile, the Manufacturing PMI improved to 50.1 in January versus 49.4 prior, beating the estimation of 49.6. The Services PMI dropped to 52.8 in January from 56.8 in December, below the market consensus of 56.5.
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Germany’s Manufacturing PMI improved to 44.1 in January, beating the estimated 42, while the Services PMI rose to 52.5, exceeding the anticipated 51. As a result, EUR/USD has picked up fresh bids, approaching the 1.0500 level after the release of these upbeat German PMIs.
The Pound Sterling has posted a fresh two-week high above 1.2400 against the US Dollar after US President Trump supported immediate interest rate cuts from the Federal Reserve. Despite this, the Fed is widely anticipated to keep interest rates steady on Wednesday. Investors are now awaiting the preliminary UK/US PMI data for January for further insights.
NZD/USD surged to near 0.5700 after US President Trump signaled the possibility of reaching a deal with China. Trump's assumption of making a deal without imposing tariffs has reduced the risk-premium of the US Dollar. Meanwhile, the Federal Reserve is unlikely to be influenced by Trump's call for immediate rate cuts.
