The USD/CAD pair continued its upward momentum, reaching approximately 1.4440 during the late U.S. session on Thursday, supported by a stronger U.S. Dollar (USD). The Canadian Dollar (CAD) weakened to a three-week low, pressured by U.S. President Donald Trump’s confirmation that tariffs on Canadian goods would take effect on March 4, extinguishing hopes for a delay.
Trump reiterated his decision to impose 25% tariffs on Canadian and Mexican imports, citing ongoing issues with drug trafficking into the U.S. from both countries. While his earlier comments on Wednesday suggested a possible postponement until April 2, the latest confirmation of the March 4 start date added further strain to the CAD.
Crude Oil Slump Weighs on CAD
In addition to tariff concerns, a significant drop in crude oil prices, which hit a two-month low, further pressured the Canadian Dollar. The decline is attributed to improved prospects for a peace agreement between Russia and Ukraine, which is dampening concerns about future oil supply disruptions. As Canada is the largest oil exporter to the U.S., falling oil prices typically weaken the Loonie, exacerbating its decline against the Greenback.
U.S. Economic Data Supports USD Strength
The U.S. Bureau of Economic Analysis (BEA) reported Thursday that the U.S. GDP grew at an annual rate of 2.3% in the fourth quarter, in line with market expectations. This solid economic performance contributed to the ongoing strength of the U.S. Dollar.
Focus Shifts to PCE Data and Economic Indicators
Looking ahead, the U.S. Personal Consumption Expenditures (PCE) Price Index will be closely watched, along with data on Personal Income/Spending and the Chicago PMI. Weaker-than-expected PCE data could further strengthen the USD against the CAD, adding more pressure on the Canadian currency.
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