The USD/CAD exchange rate is experiencing potential downside pressure as the US Dollar shows signs of weakness, influenced in part by escalating trade tensions. Recent announcements regarding a proposal for a 100% tariff on foreign-made films have raised concerns about a potential return to protectionist policies, further impacting the value of the US Dollar. Meanwhile, the Canadian Dollar is experiencing a bounce back, aligning with trends observed in other major currencies amid diminishing fears of an economic recession.
Currently, the USD/CAD pair remains steady around the 1.3800 level during the Asian trading session, following a downturn in the previous day’s performance. The US Dollar is under pressure, which may limit any upward momentum for the currency pair. As traders monitor the situation, the US Dollar Index, which measures the currency against six other major currencies, has fallen for the second consecutive day, hovering close to 99.70. Attention is now shifting towards forthcoming economic data, particularly the US ISM Services PMI, which could provide further insights into the economic landscape.
In the realm of monetary policy, there has been clarity regarding the Federal Reserve leadership; there are no plans for a change in the position of the Federal Reserve Chair, despite previous critical remarks. It has been reiterated that interest rate cuts may eventually be on the horizon.
On the employment front, the latest report on Nonfarm Payrolls revealed a robust increase of 177,000 jobs in April, surpassing expectations. The unemployment rate remained consistent at 4.2%, while average hourly earnings saw a year-over-year rise of 3.8%, matching previous figures.
Simultaneously, the Canadian Dollar is gaining strength alongside other G10 currencies as recessionary concerns recede. Canada’s GDP has indicated modest growth in March, showing resilience despite falling commodity prices and apprehension about a potential trade conflict with the US. This positive economic sentiment is uplifting the Canadian Dollar’s performance in the foreign exchange market.
