USD/CAD Reclaims 1.3700 as US Dollar Strengthens and Oil Weakens

USD/CAD Reclaims 1.3700 as US Dollar Strengthens and Oil Weakens

The USD/CAD currency pair is regaining positive momentum in Thursday’s Asian session, recovering strongly above the 1.3700 mark. This uptrend comes on the back of renewed US Dollar (USD) strength, waning expectations for Federal Reserve (Fed) rate cuts, and persistent trade tensions between the US and Canada.

Stronger USD Supports Pair

Fresh dip-buying interest in USD/CAD emerged after Wednesday's retracement from a three-week high. The renewed bullish sentiment around the US Dollar follows reduced market expectations for a near-term rate cut by the Federal Reserve, especially after US President Donald Trump dismissed reports that he would remove Fed Chair Jerome Powell. Trump acknowledged that any such move would destabilize markets, reinforcing the Fed’s credibility and boosting USD demand.

Trade Tensions and Weak Oil Drag CAD

The Canadian Dollar (CAD) continues to face headwinds due to escalating US-Canada trade frictions. President Trump recently imposed a 35% tariff on US imports from Canada, with further increases threatened if Canada retaliates. This protectionist stance has added to the pressure on CAD, which was already weakened by bearish oil prices—a key driver of Canada's resource-based economy.

Trump’s decision to maintain a 50% tariff on US copper imports is also hurting Canadian export prospects and further supporting USD/CAD’s upside.

What to Watch Next

Investors will closely monitor:

• US Retail Sales and Initial Jobless Claims
• Canadian CPI or GDP data (as released)
• Developments in US-Canada trade negotiations
• Global oil price trends