The USD/CAD exchange rate is holding steady near 1.4445 during Tuesday’s Asian trading session, reflecting an increase of 0.94% from previous levels. The Canadian dollar is reacting negatively to recent comments made by former President Donald Trump regarding potential tariffs on imports from Canada and Mexico. These statements have contributed to a weakened CAD, impacting market sentiment as traders prepare for the release of Canada’s consumer price index (CPI) inflation data for December later in the day.
During this trading cycle, the USD/CAD pair initially surged to 1.4518 before sharply retracting to its current position. Trump’s comments about the possibility of imposing a 25% tariff on Canadian and Mexican goods, primarily linked to issues related to border control and drug trafficking, have heightened concerns among investors. He indicated that this move could be executed as soon as February, which adds to the uncertainty surrounding Canada’s trade environment.
Additionally, the Bank of Canada has released a Business Outlook Survey that shows a cautious economic outlook among Canadian firms. While there is some optimism regarding improved demand and sales in the upcoming year, mainly due to expected interest rate cuts, businesses remain wary of the potential ramifications stemming from new US trade policies.
Attention is now focused on the upcoming release of December’s CPI inflation data, as it is a key indicator of the economic landscape. Forecasts suggest a year-on-year increase of 1.8% for December, slightly down from 1.9% previously recorded. Should the results surprise the market with unexpectedly high inflation, it could bolster the Canadian dollar and limit the potential ascent of the USD/CAD pair. Investors and market watchers will be closely monitoring this data in hopes of gaining insights into the health of the Canadian economy.
