USD/CAD declines below 1.4300 as US Dollar slumps on Trump tariff woes
- USD/CAD slumps to near 1.4280 amid weakness in the US Dollar.
- The consequences of US President trump’s tariffs on the global economy are expected to be narrower than feared.
- BoC Macklem confirmed that an uptick in February’s inflation data was not driven by Trump’s tariffs.
The USD/CAD pair falls sharply to near 1.4280 in North American trading hours on Tuesday. The Loonie pair declines as the US Dollar (USD) falls back after failing to hold onto Monday’s gains. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, slumps to near 103.95 after a four-day winning streak to near 104.45.
US Dollar PRICE Today
The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the strongest against the Euro.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.21% | -0.24% | -0.57% | -0.31% | -0.60% | -0.31% | -0.28% | |
| EUR | 0.21% | -0.03% | -0.36% | -0.11% | -0.36% | -0.11% | -0.07% | |
| GBP | 0.24% | 0.03% | -0.37% | -0.07% | -0.33% | -0.07% | -0.08% | |
| JPY | 0.57% | 0.36% | 0.37% | 0.26% | 0.01% | 0.26% | 0.29% | |
| CAD | 0.31% | 0.11% | 0.07% | -0.26% | -0.25% | -0.00% | -0.01% | |
| AUD | 0.60% | 0.36% | 0.33% | -0.01% | 0.25% | 0.26% | 0.29% | |
| NZD | 0.31% | 0.11% | 0.07% | -0.26% | 0.00% | -0.26% | -0.00% | |
| CHF | 0.28% | 0.07% | 0.08% | -0.29% | 0.00% | -0.29% | 0.00% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).
The Greenback falls sharply as United States (US) President Donald Trump has indicated that not all impending tariffs will be imposed on April 2. Trump said on Monday at the White House that he may give a "lot of countries" breaks on tariffs. It appears that various leaders of US trading partners have managed to negotiate deals with Trump. Though the Trump-led trade war is anticipated to result in an economic slowdown across the globe, war with fewer nations will limit the scope of economic turmoil. Limited disruption of Trump’s tariff policies has diminished the US Dollar’s appeal.
On Monday, the upbeat flash S&P Global Composite Purchasing Managers’ Index (PMI) supported the US Dollar. A robust Services PMI data contributed to a significant growth in the overall business activity. The Services PMI rose at a faster pace to 54.3 in March, compared to estimates of 51.2 and the former reading of 51.0.
This week, investors will focus on the US Personal Consumption Expenditure Price Index (PCE) data for February, which will be published on Friday. Investors will pay close attention to the inflation data as it is the Federal Reserve’s (Fed) preferred inflation gauge.
Though the Canadian Dollar (CAD) is outperforming the USD, it is less-likely to maintain the dominance as the Bank of Canada (BoC) Governor Tiff Macklem has indicated that the central bank will continue to maintain a dovish monetary policy stance despite a significant increase in the February’s Consumer Price Index (CPI) data.
“Part of the February CPI release was expected,” and the “February data hasn't fundamentally changed our view,” Macklem said last week. He clarified that the recent increase in inflation is not driven by US tariffs. “We're not really seeing evidence yet that consumer prices are being affected by tariffs.”
US Dollar FAQs
The US Dollar (USD) is the official currency of the United States of America, and the ‘de facto’ currency of a significant number of other countries where it is found in circulation alongside local notes. It is the most heavily traded currency in the world, accounting for over 88% of all global foreign exchange turnover, or an average of $6.6 trillion in transactions per day, according to data from 2022. Following the second world war, the USD took over from the British Pound as the world’s reserve currency. For most of its history, the US Dollar was backed by Gold, until the Bretton Woods Agreement in 1971 when the Gold Standard went away.
The most important single factor impacting on the value of the US Dollar is monetary policy, which is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability (control inflation) and foster full employment. Its primary tool to achieve these two goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, the Fed will raise rates, which helps the USD value. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates, which weighs on the Greenback.
In extreme situations, the Federal Reserve can also print more Dollars and enact quantitative easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used when credit has dried up because banks will not lend to each other (out of the fear of counterparty default). It is a last resort when simply lowering interest rates is unlikely to achieve the necessary result. It was the Fed’s weapon of choice to combat the credit crunch that occurred during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy US government bonds predominantly from financial institutions. QE usually leads to a weaker US Dollar.
Quantitative tightening (QT) is the reverse process whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing in new purchases. It is usually positive for the US Dollar.
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