The USD/CAD pair extended its downward movement to approximately 1.4335 during the late American session on Wednesday, with the Canadian Dollar (CAD) gaining ground against the US Dollar (USD). Investors responded positively to news that Canada may receive some relief from newly imposed US tariffs, specifically on the automotive sector.
On Wednesday, the White House announced that US President Donald Trump would delay the imposition of a 25% tariff on automobiles imported from Canada and Mexico for one month. This delay follows the implementation of Trump’s controversial tariff strategy, which initially included a 25% levy on all goods from both countries. The news helped boost the Loonie, exerting downward pressure on the USD/CAD pair.
Further weighing on the USD, concerns over the US economy surfaced following a weaker-than-expected private sector employment report. The ADP reported that private payrolls grew by just 77,000 in February, significantly underperforming the forecasted 140,000 and down from the previous reading of 186,000 (revised from 183,000). This raised concerns about the potential slowdown in the US labor market.
However, the Canadian Dollar’s upside potential remains capped by declining crude oil prices. Reports that OPEC+ plans to increase oil output in April continue to exert pressure on oil prices, which could weigh on the CAD, given that Canada is the largest oil exporter to the United States. As oil prices fall, the CAD often faces downward pressure, limiting further downside movement in the USD/CAD pair.
Looking ahead, investors will closely watch Thursday’s economic releases, including the US Initial Jobless Claims and Canada’s Ivey Purchasing Managers Index (PMI) for any additional market-moving data.
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