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USD/CAD is trading in positive territory around 1.3880 in early Asian trading on Thursday. However, the upside for the pair may be limited given the heightened trade uncertainty. Traders were watching progress in U.S. trade negotiations with trading partners.
Federal Reserve Chairman Jerome Powell said on Wednesday that trade tensions could undermine the Fed’s employment and inflation goals. Powell further noted that U.S. economic growth appears to be slowing, with consumer spending rising modestly, a surge in imports to avoid tariffs likely weighing on gross domestic product estimates, and market sentiment deteriorating. Financial markets expect the U.S. central bank to resume rate cuts in June and expect the policy rate (currently in a range of 4.25%-4.50%) to be lowered by a full percentage point by the end of the year.
Additionally, U.S. retail sales rose 1.4% in March after increasing 0.2% in February, according to data from the U.S. Census Bureau on Wednesday. This figure was better than the expected 1.3%. However, the stronger-than-expected data failed to boost the dollar as traders awaited whether U.S. President Donald Trump’s administration can reach new trade deals with trading partners.
The Bank of Canada (BoC) kept its benchmark interest rate at 2.75% at its April meeting on Wednesday, its first pause after seven consecutive rate cuts. The Bank of Canada said uncertainty about U.S. tariffs made it impossible to issue its regular economic forecasts. Investors put the probability of the BoC cutting rates again at its next policy decision in June at nearly 50%, and expect a total of two more rate cuts by the end of the year.
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