The Canadian Dollar (CAD) is facing challenges in the foreign exchange market as it struggles to gain ground against the US Dollar (USD). Despite some minor gains this morning, the CAD remains a relative underperformer compared to the USD. The Mexican Peso (MXN) is also losing ground, adding to the pressure on the CAD.
The CAD’s underperformance can be attributed to the focus on President Trump’s recent statements supporting wide-ranging tariffs in his Bloomberg interview. This has created uncertainty and volatility in the market, leading to a weaker CAD against the backdrop of USD softness.
Recent Canadian CPI data has been mixed, but the central bank’s willingness to ease rates is a cause for concern for the CAD. The lower than expected headline CPI reading has raised expectations of a rate cut on the 24th, with swaps pricing already factoring in a 25bps reduction. This has widened the US/Canada term spreads, further impacting the CAD’s performance.
The technical outlook for the CAD is also bleak, as spot losses from yesterday have left a bearish ‘shooting star’ candle signal on the daily chart. This indicates a potential near-term peak for the USD, although intraday losses have found some support around the 1.3655/60 level. This suggests that the CAD may continue to face challenges in the coming days.
The Canadian Dollar is currently struggling against the US Dollar amidst broader USD softness and uncertainty surrounding President Trump’s trade policies. With the central bank leaning towards easing rates and technical signals pointing to a potential reversal in USD strength, the CAD faces an uphill battle in the foreign exchange market. Investors and traders should closely monitor these developments to assess the future direction of the CAD.