12 Feb 2025

The USD/CAD currency pair is gaining momentum, reaching approximately 1.4295 on Wednesday during the early hours of the European session, supported by a stronger US Dollar (USD). The release of the US Consumer Price Index (CPI) inflation data for January is anticipated later on Wednesday.

US President Donald Trump has enacted proclamations that impose tariffs on steel and aluminum imports, which include products from Canada. However, these restrictions are set to take effect only on March 12.

In his semi-annual report to Congress, Federal Reserve Chair Jerome Powell indicated that Fed officials are not in a hurry to reduce interest rates, citing a robust job market and solid economic growth. He also mentioned that Trump's tariff policies could lead to increased prices, complicating the Fed's ability to lower rates. This cautious approach from the US central bank is expected to strengthen the Greenback in the short term.

Conversely, crude oil prices are experiencing a slight increase due to sanctions that have raised concerns regarding Russian and Iranian oil supplies, alongside escalating tensions in the Middle East. This situation may provide some support to the commodity-linked Canadian Dollar (CAD) and create challenges for the USD/CAD pair. It is important to note that Canada is the largest oil exporter to the United States, and rising crude oil prices typically have a favorable effect on the value of the CAD.