- USD/CAD loses ground as softer US inflation data reinforce the Fed rate cut odds.
- US Treasury Secretary Scott Bessent said President Trump’s threat to impose 100% tariffs on Chinese goods is “off the table.”
- President Trump set an additional 10% tariff hike on Canada, responding to an Ontario ad aired during the World Series.
USD/CAD depreciates after two days of little gains, trading around 1.3980 during the Asian hours on Monday. The pair loses ground as the US Dollar (USD) faces challenges following the release of softer US inflation data on Friday, which helps keep the likelihood of the Federal Reserve (Fed) rate cuts higher. The CME FedWatch Tool indicates that markets are now pricing in nearly a 97% chance of a Fed rate cut in October and a 96% possibility of another reduction in December.
The US Bureau of Labor Statistics (BLS) reported on Friday that the US Consumer Price Index (CPI) rose 3.0% year-over-year (YoY) in September, following a 2.9% the prior month. This reading came in below the market expectation of 3.1%. Meanwhile, the monthly CPI increased 0.3%, against the 0.4% rise seen in August. The core CPI increased 0.2% month-over-month, compared to the market consensus of 0.3%, while the yearly core CPI was up 3.0% in September.
However, the downside of the USD/CAD pair could be restrained as the US Dollar may receive support amid easing United States (US)-China trade tensions. The top negotiators US and China reached a consensus on major disputes and paved the way for Presidents Donald Trump and Xi Jinping to meet on Thursday to finalize a trade deal aimed at easing tensions.
Additionally, US Treasury Secretary Scott Bessent said that President Trump’s threat to impose 100% tariffs on Chinese goods “is effectively off the table,” while adding that China will purchase soybeans and postpone rare-earth export controls.
President Trump announced on Saturday that he was raising tariffs on Canada by an additional 10% “above what they’re paying now.” The move came in response to an ad from Canada’s Ontario province that aired during the World Series broadcast. Trump had already halted trade talks with Ottawa on Thursday, calling the tariff-related ad misleading.
