The Canadian Dollar gains as Trump pauses 50% tariffs and traders reduce Fed rate hike expectations amid cooling US inflation data.
The USD/CAD pair fell to around 1.3880 during Asian trading, retreating from its recent lows near levels last seen in early June. The decline follows US President Donald Trump’s decision to pause 50% tariffs on Canada for three days after negotiations with Prime Minister Mark Carney, providing temporary relief for the CAD.
Crude oil prices reaching a three-week high amid US-Iran tensions further supported the commodity-linked Loonie. Meanwhile, softer US inflation and consumer spending data released last week led traders to trim bets on an immediate Fed rate hike, weighing on the USD. However, elevated energy prices could still prompt a hawkish Fed stance, capping USD losses.
Markets now await the FOMC Minutes for further clues on monetary policy. The CME Group’s FedWatch Tool shows a 68% probability of a year-end rate hike, keeping traders cautious ahead of the release.