USD/CAD struggles to find acceptance above 1.4300 amid modest USD weakness

USD/CAD attracts some buyers and snaps a three-day losing streak to over a one-month low.
Concerns about the US-Canada trade war and retreating Crude Oil prices undermine the Loonie.
A modest USD pullback from a multi-week high caps the pair ahead of the US macro data.

Haresh Menghani FXStreet

The USD/CAD pair builds on the previous day's modest bounce from the 1.4235 area, or over a one-month low, and gains some follow-through positive traction on Thursday. Spot prices stick to intraday gains through the first half of the European session and for now, seem to have snapped a three-day losing streak, though bulls seem to struggle to find acceptance above the 1.4300 mark.

The Canadian Dollar (USD) weakens in reaction to US President Donald Trump's announcement to impose 25% tariffs on auto imports, raising the risk of a further escalation of the US-Canada trade war. Furthermore, the uncertainty over Trump's reciprocal tariffs on April 2 prompts some profit-taking around Crude Oil prices, especially after the recent run-up to a three-and-half-week high touched on Wednesday. This is seen as another factor undermining the commodity-linked Loonie and acting as a tailwind for the USD/CAD pair.

Meanwhile, the US Dollar (USD) struggles to capitalize on Wednesday's better-than-expected Durable Goods Orders data-led gains and retreats from a three-week top. The Federal Reserve revised its growth outlook downward amid the uncertainty over the impact of Trump's trade policies and signaled that it would deliver two 25 basis points interest rate cuts by the end of this year. This, in turn, keeps a lid on the recent USD positive move witnessed over the past two weeks or so and keeps a lid on the USD/CAD pair.

Moving ahead, traders now look forward to the US economic docket – featuring the release of the final US Q4 GDP print, the usual Weekly Initial Jobless Claims, and Pending Home Sales. This, along with speeches from influential FOMC members, could drive the USD. Apart from this, Oil price dynamics might produce short-term trading opportunities around the USD/CAD pair. The focus, however, remains on the US Personal Consumption Expenditure (PCE) Price Index, which should provide cues about the Fed's rate-cut path.

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What are tariffs?

Tariffs are customs duties levied on certain merchandise imports or a category of products. Tariffs are designed to help local producers and manufacturers be more competitive in the market by providing a price advantage over similar goods that can be imported. Tariffs are widely used as tools of protectionism, along with trade barriers and import quotas.

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Although tariffs and taxes both generate government revenue to fund public goods and services, they have several distinctions. Tariffs are prepaid at the port of entry, while taxes are paid at the time of purchase. Taxes are imposed on individual taxpayers and businesses, while tariffs are paid by importers.

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There are two schools of thought among economists regarding the usage of tariffs. While some argue that tariffs are necessary to protect domestic industries and address trade imbalances, others see them as a harmful tool that could potentially drive prices higher over the long term and lead to a damaging trade war by encouraging tit-for-tat tariffs.

What is US President Donald Trump’s tariff plan?

During the run-up to the presidential election in November 2024, Donald Trump made it clear that he intends to use tariffs to support the US economy and American producers. In 2024, Mexico, China and Canada accounted for 42% of total US imports. In this period, Mexico stood out as the top exporter with $466.6 billion, according to the US Census Bureau. Hence, Trump wants to focus on these three nations when imposing tariffs. He also plans to use the revenue generated through tariffs to lower personal income taxes.

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Author

Haresh Menghani

FXStreet

Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.

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