- USD/CAD lacks firm intraday direction on Monday amid a combination of diverging factors.
- Fed rate cut bets and concerns about a slowing economy continue to weigh on the Greenback.
- Subdued Crude Oil prices undermine the Loonie and support the pair amid the risk-off mood.
The USD/CAD pair struggles to capitalize on its modest bounce from the monthly low touched last Wednesday and kicks off the new week on a subdued note amid mixed cues. Spot prices, however, hold above the 100-day Simple Moving Average (SMA) pivotal support and currently trade around the 1.4300 mark, nearly unchanged for the day.
The US Dollar (USD) selling bias remains unabated for the third successive day on Monday as the uncertainty over US President Donald Trump’s aggressive trade policies continues to fuel worries about a tariff-driven US economic slowdown. This remains supportive of the growing market acceptance that the Federal Reserve (Fed) could resume its rate-cutting cycle and keep the USD bulls on the defensive, which, in turn, acts as a headwind for the USD/CAD pair.
Meanwhile, the USD bulls largely shrug off signs of rising inflation in the US. In fact, the US Personal Consumption Expenditure (PCE) Price Index showed on Friday that the core gauge that excludes volatile food and energy prices rose 0.4% in February, marking the biggest monthly gain since January 2024 and lifting the yearly rate to 2.8%. Moreover, the University of Michigan’s 12-month inflation expectations soared to the highest level in nearly 2-1/2 years in March.
However, the prevalent risk-off environment, ahead of US President Donald Trump’s reciprocal tariffs due to be announced on Wednesday, helps limit the downside for the safe-haven Greenback. Trump last week rattled markets by imposing a 25% tariff on all non-American cars and light trucks. Adding to this, a report over the weekend said that Trump will consider higher tariffs against a broader range of countries, which will take effect from April 2.
Furthermore, hopes for a Ukraine peace deal keep Crude Oil prices below a multi-week high touched last Wednesday, which further seems to undermine the commodity-linked Loonie and lend some support to the USD/CAD pair. This, in turn, warrants some caution before positioning for the resumption of the currency pair’s recent well-established downtrend from the vicinity of mid-1.4500s, or the monthly swing high touched on March 4.
