USD/CAD steadies above $1.43 as traders weigh tariff risks and key economic data
USD/CAD holds near 1.4310 as markets assess trade risks and await US, Canadian economic reports
The USD/CAD pair remained elevated around 1.4310 during Friday’s Asian session, marking its second consecutive day of gains as markets reacted to heightened trade tensions and awaited key economic data from both the United States and Canada. The move reflects cautious sentiment as risk aversion grows following U.S. President Donald Trump’s latest tariff announcement.
On Wednesday, Trump signed an executive order imposing a 25% tariff on auto imports and warned of additional measures against countries that retaliate—explicitly mentioning Canada and the European Union. Given that over 75% of Canadian exports head to the U.S., the Canadian Dollar has come under pressure amid uncertainty about the broader economic fallout. Despite this, optimism remains that Canada could be placed under the lowest tier of Trump’s three-tiered tariff regime, potentially shielding key export sectors.
USD/CAD price analysis (Jan 2025 - Mar 2025) Source: TradingView.
USD under pressure as yields dip ahead of PCE data
The U.S. Dollar’s gains have been tempered by declining Treasury yields, with the 2-year and 10-year notes slipping to 3.99% and 4.35%, respectively. Moody’s has cautioned that rising fiscal deficits due to tariff-related revenue shifts and potential tax cuts could heighten debt concerns, placing U.S. credit ratings at risk.
Still, the greenback found modest support from better-than-expected Q4 GDP data, which showed the U.S. economy expanding at an annualized pace of 2.4%, slightly above the 2.3% forecast. Market focus now turns to Friday’s release of the Fed’s preferred inflation gauge—the core PCE Price Index—for signals on future monetary policy direction.
Oil prices and BoC outlook support CAD long term
The Canadian Dollar has also drawn some resilience from firming oil prices and reduced expectations of aggressive monetary easing by the Bank of Canada. February’s hotter-than-anticipated CPI report has led markets to reassess the likelihood of further rate cuts, offering support to Canadian assets in the face of global trade headwinds.
We earlier noted that optimism surrounding possible tariff exemptions and strong oil prices helped drive the CAD to a one-month high. Today’s continued consolidation above 1.4300 suggests that markets are awaiting further clarity from Friday’s PCE and GDP prints before making directional bets.
