The USD/CAD pair remained subdued for the fourth consecutive day, hovering around 1.4260 during Thursday’s Asian trading session. The pair faces downward pressure as the US Dollar (USD) weakens, largely due to falling Treasury yields.
The US Dollar Index (DXY), which measures the USD against six major currencies, is retreating from recent highs, trading at approximately 104.30. Meanwhile, yields on US Treasury bonds stand at 4.0% for the 2-year note and 4.35% for the 10-year note at the time of writing.
Investors are awaiting key US economic data, including the release of weekly Initial Jobless Claims and the final Gross Domestic Product (GDP) for the fourth quarter (Q4). The upcoming Personal Consumption Expenditures (PCE) report, due on Friday, is also expected to provide critical insights into inflation, influencing future Federal Reserve policy.
US Tariff Measures Add to Market Uncertainty
While the USD is under pressure, the Canadian Dollar (CAD) may face its own challenges following new US trade measures. On Wednesday, former US President Donald Trump signed an executive order imposing a 25% tariff on auto imports, effective April 2, with collections starting the following day. However, auto parts imports will receive a one-month reprieve, with parts from Canada and Mexico exempted under the United States-Mexico-Canada Agreement (USMCA), until enforcement systems are established.
Reacting to the news, Canadian Prime Minister Mark Carney described the tariffs as a “direct attack” on auto sector workers. Carney is expected to return to Ottawa to coordinate a response with his government, as reported by CNN Business.
Despite these developments, the downside for USD/CAD may be capped as the Canadian Dollar could face its own set of challenges amidst the ongoing trade tensions.
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