The USD/CAD pair continues its bullish momentum for the sixth consecutive day, trading around 1.4710 during early European hours on Monday. The recent surge—over 1%—follows US President Donald Trump’s imposition of a 25% import tariff on Canadian goods and a 10% tariff on Canadian energy exports. These tariffs, set to take effect on Tuesday, have prompted retaliatory measures from Canada, Mexico, and China.
The US Dollar Index (DXY) climbs for the fifth straight day, reaching 109.50. Investors are closely monitoring the ISM Manufacturing PMI data for January, which could provide further direction for the Greenback. US Treasury Secretary Scott Bessent initially warned that tariffs could fuel inflation and strengthen the USD. Still, he has since endorsed a new 2.5% universal tariff plan, which may increase over time.
The interest rate differential between the Bank of Canada (BoC) and the Federal Reserve (Fed) also supports the upside of USD/CAD. The BoC recently cut its benchmark rate by 25 basis points to 3.0% and ended its quantitative tightening program, while the Fed has opted to keep rates steady.
Trade Idea:
Consider buying USD/CAD on dips near 1.4680, targeting 1.4800, with a stop-loss at 1.4600. US tariffs and rate differentials favor further upside.