The U.S. dollar rebounded against most major currencies, including the Canadian dollar, after experiencing a 1.2% decline—the largest drop since 2023. (MarketWatch)
Leading up to President Trump’s inauguration, speculation grew that his proposed tariffs would fuel inflation and prevent the Federal Reserve from cutting rates, creating strong headwinds for U.S. domestic growth. (MarketWatch)
However, inauguration day passed without any immediate tariffs, with indications suggesting that such measures may be postponed. (MarketWatch)
The risk of Trump’s tariff policy, combined with a strong domestic economy, is expected to keep the Federal Reserve in a dovish stance (less likely to cut rates), supporting a stronger U.S. dollar. (Financial Times) In contrast, countries like Canada are considering interest rate cuts to bolster their lackluster domestic economies. Typically, countries offering higher interest rates attract more investment, increasing demand for their currencies.
By Wednesday morning, the Canadian dollar was weakening again against the U.S. dollar. The general consensus is that the U.S. dollar still has room to grow, with the policy shifts and heightened volatility characteristic of the Trump administration likely to persist, further fueling demand for the stability of the greenback.
The Canadian dollar is currently trading at 1.4377 CAD against the US Dollar.
