- USD/CAD tumbles below 1.4300 as the Canadian Dollar strengthens following US President Trump's decision to delay tariffs on Canada.
- Bank of America (BofA) anticipates that US tariff threats against China will persist until a new USMCA deal is negotiated.
- Investors look ahead to the US ISM Services PMI and ADP Employment data for December.
USD/CAD continues its losing streak, falling below the 1.4300 level in Wednesday's European session. The Canadian Dollar (CAD) remains strong after US President Donald Trump postponed a 25% tariff on Canada for 30 days. The delay follows an agreement between Canada and the US to implement criminal enforcement at borders aimed at curbing the flow of drugs and undocumented immigrants into the US.
The suspension of tariff orders has prompted analysts to revise their outlook on the Canadian economy, as initial projections had factored in the impact of trade levies. While CAD has surged on the relief rally, Bank of America (BofA) expects that the rally may be short-lived, warning that US tariff threats and trade uncertainties will likely persist until a new United States-Mexico-Canada Agreement (USMCA) deal is negotiated.
Key Market Focus: Canadian Employment Data & BoC Rate Outlook
This week, investors will closely monitor Canada's January employment data, set for release on Friday. The labor market report is projected to show a 25K increase in jobs, a sharp decline from December's 90.9K gain. The Unemployment Rate is expected to rise to 6.8% from 6.7%.
The employment data will play a key role in shaping expectations for the Bank of Canada's (BoC) monetary policy. Currently, traders anticipate a 25 basis point (bps) rate cut to 2.75% in the March meeting.
US Dollar Weakens as Market Sentiment Improves
The US Dollar (USD) underperforms against major peers as market sentiment turns positive on expectations that Trump's tariff agenda will be less severe than initially feared.
On the economic calendar, investors will focus on:
- US ADP Employment Change (January)
- US ISM Services PMI (January)
Both reports will be released during Wednesday's North American session and could influence USD/CAD price action.
