USD/CAD strengthens above 1.4100 on tariff pause

USD/CAD rebounds to around 1.4105 in Thursday’s early Asian session.

Trump announced a 90-day pause on higher reciprocal tariffs on US trading partners.

The US CPI inflation report for March will be in the spotlight later on Thursday. 

The USD/CAD pair recovers some lost ground to near 1.4105 during the early Asian session on Thursday. The US Dollar (USD) edges higher against the Canadian Dollar (CAD) due to US President Donald Trump’s announcement of a 90-day delay on reciprocal tariffs. The US Consumer Price Index (CPI) inflation report will take center stage later on Thursday. 

US President Donald Trump said on Wednesday that he authorized a 90-day pause on new tariffs for most US trade partners to 10% to allow trade negotiations with those countries. “The 90-day pause is an encouraging sign that negotiations with most countries have been productive,” said Mark Hackett at Nationwide. “It also injects some much-needed stability into a market rattled by uncertainty. 

The Federal Reserve (Fed) officials continue to downplay the immediate impact of a potential trade war on the US economy, preferring to emphasize the data as a key policy driver. Traders are now pricing in only a 40% possibility of a Fed rate cut in next month’s meeting, despite the recent market volatility, according to the CME FedWatch tool. 

Traders will take more cues from the US CPI inflation report for March later on Thursday. The headline CPI is expected to show an increase of 2.6% YoY in March, while the core CPI is estimated to show a rise of 3.0% during the same period.

Meanwhile, a recovery in Crude Oil prices could lift the commodity-linked Loonie. It’s worth noting that Canada is the largest oil exporter to the US, and higher crude oil prices tend to have a positive impact on the CAD value.