USD/CAD Strengthens Amid Fed Outlook and Global Trade Tensions

USD/CAD Strengthens Amid Fed Outlook and Global Trade Tensions

USD/CAD remains on the front foot, trading slightly higher at 1.3685 on Thursday morning in Asia, extending gains above the prior close of 1.3650. The pair is bolstered by a resilient US Dollar (USD) and mounting global trade war risks that pressure the Canadian Dollar (CAD).

Fed Minutes Hint at Rate Cuts Ahead

The release of the June 17–18 FOMC minutes on Wednesday indicated that most Federal Reserve officials anticipate rate cuts could be warranted by the end of 2025. Policymakers adopted a cautious, wait-and-see stance, voting unanimously to hold the benchmark interest rate between 4.25% and 4.50%. This signals a potential policy shift that could drive further volatility in the USD/CAD pair.

Key Economic Data in Focus

Markets now await the US Initial Jobless Claims, due later today. As a crucial indicator of labor market health, this data could shape expectations around the Fed’s rate path and impact short-term USD momentum. A weaker-than-expected report may increase the odds of earlier rate cuts.

Trade Tensions Fuel USD Demand

Investor sentiment was further rattled after US President Donald Trump unveiled a fresh wave of tariff demand letters on Wednesday. The announcement has reignited concerns of a renewed global trade war, prompting risk aversion in markets. As a commodity-linked and risk-sensitive currency, the Canadian Dollar faces downward pressure, offering USD/CAD a bullish bias.

What’s Next for USD/CAD?

As risk appetite remains fragile, traders will continue to monitor:

• US economic indicators, particularly Initial Jobless Claims and CPI figures.
• Developments in US trade policy and potential retaliation from trading partners.
• Commentary from Fed officials on future monetary policy.