26 Mar 2025

The USD/CAD pair experienced a decline after news emerged that Canada might be subjected to the lowest level of the US tariffs set for April 2. Reports indicate that President Trump is contemplating a three-tiered tariff structure, although this strategy has not been formally confirmed.

Federal Reserve Governor Adriana Kugler emphasized that the Fed's monetary policy remains restrictive and is appropriately calibrated. As a result, USD/CAD has now fallen for three consecutive sessions, trading around 1.4270 during the Asian market hours on Wednesday. This downward trend is attributed to the strengthening of the Canadian Dollar (CAD), following information from the "Toronto Star" regarding the potential tariff classification for Canada.

While President Trump is considering a three-tiered tariff system, some reports suggest that this plan has not yet been officially adopted. Nevertheless, it appears to align with the government's anticipations for the forthcoming week.

Furthermore, the Canadian Dollar (CAD) is benefiting from increasing oil prices, which are bolstered by supply concerns due to heightened tensions in the Middle East and a more significant-than-anticipated decline in U.S. crude inventories. As of the time of this writing, the price of West Texas Intermediate (WTI) oil has remained positive for the third consecutive day, trading at approximately $69.10 per barrel.

On the other hand, the potential decline of the USD/CAD pair may be constrained as the U.S. Dollar (USD) receives support amid growing market caution in anticipation of U.S. President Donald Trump's tariff announcement scheduled for April 2. The U.S. Dollar Index (DXY), which measures the USD against six major currencies, has recovered from its recent losses and is currently trading around 104.30.

Moreover, the U.S. Dollar is further supported by the assertive comments made by Federal Reserve Governor Adriana Kugler. On Tuesday, Kugler highlighted that the Fed's interest rate policy remains tight and effectively positioned. She also pointed out that progress towards the 2% inflation target has decelerated since last summer and characterized the recent increase in goods inflation as "unhelpful."