01 Apr 2025

USD/CAD fluctuates between slight gains and minor losses, remaining below a multi-week peak established on Tuesday. The strength of oil prices supports the Canadian dollar (Loonie) and limits the movement of the currency pair amid weak demand for the US dollar. Traders appear hesitant, opting to wait for the announcement regarding reciprocal tariffs from President Trump.

On Tuesday, the USD/CAD pair reached a two-and-a-half-week high, yet it struggles to gain traction or extend its intraday rise beyond the 1.4400 level. Nevertheless, spot prices are able to maintain their recent recovery as traders hold off on making new directional bets until they receive updates on Trump's tariff decisions.

Currently, a slight strengthening of the US dollar provides some support for the USD/CAD pair. Conversely, the Canadian dollar faces pressure from the potential escalation of the trade conflict between the US and Canada. Additionally, the looming political uncertainty ahead of the snap election on April 28 is seen as a burden on the CAD, further supporting the currency pair.

Moreover, investors are increasingly convinced that the slowdown in US economic growth, exacerbated by uncertainty surrounding Trump's trade tariffs, may compel the Federal Reserve to resume its rate-cutting cycle in the near future. This, combined with a modest improvement in global risk sentiment, limits any significant upward movement for the safe-haven US dollar and the USD/CAD pair.

Furthermore, the recent rise in crude oil prices, which reached a one-month high on Monday, bolsters the commodity-linked Loonie and contributes to capping the USD/CAD pair. Trump's threats of substantial tariffs on Russian oil and potential military actions in Iran heighten the risk of supply disruptions, providing additional support for crude oil prices.

Traders are now anticipating the upcoming US economic data, which includes the JOLTS Job Openings and ISM Manufacturing PMI reports. However, the primary focus will remain on Trump's trade policies, which are expected to influence overall risk sentiment and drive demand for the US dollar. Additionally, fluctuations in oil prices are likely to play a significant role in market dynamics.