The USD/CAD pair reversed its previous day's losses, gaining positive traction on Tuesday. Falling oil prices, a modest USD uptick, and divergent monetary policy outlooks between the Fed and BoC contributed to the pair's rally. The pair found support near the 1.4385 level during the Asian session, moving closer to the 1.4500 psychological mark.
The USD/CAD pair rallied on Tuesday, reversing a portion of the previous day's sharp decline. This upward movement was driven by a confluence of factors, including falling oil prices , a modest uptick in the US Dollar (USD), and divergent policy outlooks between the Federal Reserve (Fed) and the Bank of Canada (BoC). The pair found support near the 1.4385 region during the Asian session, pushing spot prices closer to the psychologically significant 1.4500 level.
Crude oil prices, Canada's primary export, continued their downward trend for the second consecutive day, reaching a one-month low. This decline weighed on the Loonie, as it is directly linked to oil prices. The weaker Loonie provided a tailwind for the USD/CAD pair amidst a surge in USD demand. President Trump's decision to delay recently imposed tariffs on imports from Canada and Mexico eased concerns about potential supply disruptions from major oil suppliers to the US.Furthermore, expectations that Trump's policies could fuel inflation and reduce the Fed's incentive to further lower interest rates triggered a modest rebound in US Treasury bond yields. This, coupled with concerns about the potential economic fallout from Trump's protectionist policies, bolstered the safe-haven USD, contributing to the USD/CAD pair's upward momentum. The BoC's dovish stance also suggests that the path of least resistance for spot prices is upwards.
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