USD/CAD price forecast: Canadian dollar struggles despite weaker U.S. dollar
The USD/CAD pair moved higher toward 1.4360 on Thursday despite the U.S. dollar sliding to a four-month low. The US Dollar Index (DXY) fell to 104.00, weighed down by expectations that President Trump’s tariff policies could negatively impact the U.S. economy.
Investors anticipate that higher tariffs will eventually increase consumer costs, weakening economic demand. However, the Canadian dollar’s underperformance continues, as markets react to the 25% tariffs imposed on Canadian and Mexican imports earlier in the week.
USD/CAD price analysis (Jan 2025 - Mar 2025) Source: TradingView.
Trade tensions ease slightly as U.S. delays auto tariffs
The White House announced that tariffs on Canadian automobiles have been reprieved following discussions with major automakers. The move signals that the trade war may be less aggressive than initially feared, providing some relief for the Canadian dollar.
Additionally, reports suggest the US Department of Commerce is considering exemptions for goods compliant with the USMCA from the 25% tariffs on Canada. Despite these developments, Canada’s economy remains vulnerable to weaker trade conditions, as the country relies heavily on exports to the US.
Focus shifts to upcoming employment data
Investors now await US and Canadian employment data for February, set for release on Friday. Analysts predict slower job growth in Canada, whereas the US labor market is expected to show strong demand.
A better-than-expected U.S. jobs report could strengthen the US dollar further, potentially pushing USD/CAD toward the 1.4400 level. On the other hand, if Canada’s trade surplus continues to grow, it could provide much-needed support for the Canadian dollar in the coming weeks.
As previously discussed USD/CAD has been trading within a range of 1.4370 and 1.4545 throughout the week, highlighting market hesitation in pushing the pair significantly higher. The lack of clarity over the ultimate tariff regime continues to weigh on CAD sentiment, limiting upside momentum.
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