- USD/CAD lost value after US President Trump called on the Fed to immediately cut interest rates.
- Following Trump’s statements, US Treasury bond interest rates fell and the dollar rose.
- Commodities pegged to the Canadian dollar have been supported by rising oil prices.
USD/CAD fell for a second straight day, trading around 1.4330 in early trading in Europe on Friday. The decline in the USD/CAD pair was due to the weakening of the U.S. dollar amid heightened risk aversion following U.S. President Donald Trump’s speech on Thursday evening.
Trump said he wants the Fed to lower interest rates immediately. “With oil prices falling, I will call for interest rates to be lowered immediately, and similarly, interest rates should be lowered around the world,” Trump said at the World Economic Forum in Davos, Switzerland.
Following Trump’s statements, US Treasury yields fell, while the dollar index (DXY), an index that measures the currency’s performance against a basket of six major currencies, continued to decline. US Treasury yields fell below 107.00, and as of the time of writing, 2-year and 10-year US Treasury yields are at 4.26% and 4.63%, respectively.
Investors will focus on the S&P Global Purchasing Managers Index (PMI) and Michigan Consumer Confidence Index data for January in the US.
Commodities pegged to the Canadian dollar (CAD) received support from rising oil prices. West Texas Intermediate (WTI) crude prices snapped a six-day losing streak and were trading around $74.50 a barrel at press time.
But oil prices fell this week after US President Donald Trump announced sweeping plans to boost manufacturing in the US and called on the Organisation of the Petroleum Exporting Countries (OPEC) to lower oil prices.
Summary:
The move of USD/CAD below the 1.4350 level reflects a market reaction to Trump’s request for the Fed to cut rates. While rate cuts typically result in a weaker currency, the full impact depends on the Fed’s actual actions, economic data, and overall market sentiment.
