USD/CAD Slides to 1.3700 as Strong Canadian Data Weakens US Dollar

USD/CAD Falls to Around 1.3700 as Canadian Economic Data Strengthens the Loonie

The USD/CAD currency pair extended its downward trend on Monday, falling to the 1.3700 zone during the European trading session. This marks a continuation of the pair's bearish momentum since May 19, driven largely by a combination of strong Canadian data and mounting concerns over the US economy.

Canadian Dollar (CAD) strength was reinforced by upbeat April retail sales figures and hotter-than-expected inflation. The back-to-back monthly gains in consumer spending highlight robust domestic demand, encouraging investors to believe that the Bank of Canada (BoC) may leave interest rates unchanged at its June policy meeting, rather than implementing a 25 basis-point cut as previously expected.

On the other side, the US Dollar (USD) remains under pressure as fears over the growing US fiscal deficit deepen. President Donald Trump’s proposed "One Big Beautiful Bill," which includes sweeping tax relief measures, could expand the US deficit by an estimated $3.8 billion if passed by the Senate. This fiscal uncertainty, coupled with dovish expectations for the Federal Reserve, has driven the US Dollar Index (DXY) down to near 98.90, its lowest level in over a month.

Altogether, these opposing dynamics — a stronger CAD on solid economic fundamentals and a weaker USD on fiscal risks — continue to push USD/CAD lower, with further downside likely if market sentiment holds.