The USD/CAD pair held firm above 1.4200 on Wednesday, supported by renewed demand for the US dollar as markets reacted to reports of new tariff plans from Donald Trump. The currency pair remained in a tight range as traders weighed the potential economic impact of trade policy shifts alongside broader market forces.
The US dollar’s strength has been reinforced by expectations that the Federal Reserve may keep interest rates higher for longer, despite ongoing discussions about potential cuts later in the year. Stronger-than-expected US economic data and persistent inflation concerns have limited downside pressure on the greenback, allowing USD/CAD to maintain its upward momentum.
At the same time, Trump’s proposed new tariffs have introduced uncertainty, with investors assessing how they might affect global trade and risk sentiment. Historically, protectionist policies have supported the US dollar, as they tend to create market volatility and drive investors toward safer assets. If further details suggest aggressive tariff actions, USD/CAD could see additional upside in the coming sessions.
Meanwhile, the Canadian dollar has remained under pressure, struggling to find support from commodity prices, particularly crude oil. While oil markets have been relatively stable, concerns over global demand and geopolitical risks have prevented a strong recovery in prices, limiting the loonie’s ability to rebound.
The Bank of Canada (BoC) remains a key factor in the pair’s outlook, with policymakers signaling caution amid signs of economic slowdown. While the BoC has kept rates steady, any further divergence from the Fed’s stance could increase pressure on the Canadian dollar, making USD/CAD more likely to extend gains.
For now, USD/CAD remains in a bullish position, with the 1.4200 level acting as a key support zone. Traders will be closely watching for further developments on US trade policy and upcoming economic data to determine whether the pair has room to push higher or if profit-taking could bring some consolidation.
