07 Jan 2025

USD/CAD weakens to around 1.4310 in Tuesday’s early European session.
Justin Trudeau announced his resignation as Canada’s Prime Minister, supporting the Loonie.
Hawkish Fed expectations might help limit the pair’s losses.

The USD/CAD currency pair has declined to approximately 1.4310 during the early hours of the European session on Tuesday. The Canadian Dollar (CAD) has gained strength against the US Dollar following reports indicating that Canadian Prime Minister Justin Trudeau is set to resign.

On Monday, Reuters disclosed that Trudeau would reveal his resignation plans, anticipated to occur prior to an emergency meeting of Liberal legislators scheduled for Wednesday. Nick Rees, a senior FX market analyst at Monex Europe Ltd, remarked, "The announcement of Trudeau's resignation is contributing to the strengthening of the loonie."

On Tuesday, The Globe and Mail, a Canadian news outlet, reported that the federal government is considering the early publication of a proposed list of American products that could face retaliatory tariffs from Canada if the incoming US President Donald Trump enacts a 25% tax on all Canadian goods.

Investors are keenly observing the potential aggressiveness of Trump's tariff policies upon his inauguration. In the meantime, the US Federal Reserve (Fed) is expected to maintain steady interest rates in its upcoming meeting, which may bolster the US Dollar. The CME FedWatch tool indicates that the market is assigning only a 7.5% probability to a 25 basis points (bps) rate cut during the January Fed meeting.