Photo by Michelle Spollen on Unsplash

• USD/CAD holds positive ground around 1.4380 in Thursday’s early Asian session. 
• Trump said his administration was considering 25% tariffs on Mexican and Canadian imports, weighing on the CAD. 
• Canada’s CPI inflation boosts the bets for the BoC rate cut in January.

The USD/CAD pair trades with mild gains near 1.4380 during the early Asian session on Thursday. The US weekly initial Jobless Claims will take center stage on Thursday. Also, investors continue to digest the impact of Trump 2.0 ahead of US S&P PMI data for January, which will be published on Friday. 

US President Donald Trump said late on Tuesday that he will impose 25% tariffs against Canada and Mexico, as well as duties on China and the European Union, on February 1. Trump’s remarks drag the Canadian Dollar (CAD) lower as Canada is highly dependent on trade with the US, with roughly 75% of its exports heading south. Analysts at Deutsche Bank said they see the CAD to the Greenback as "one of the most under-priced FX crosses for an FX trade war."

Cooling inflation in Canada last month has opened the door to the Bank of Canada (BoC) rate cut in January, contributing to the Loonie’s downside. Data released by Statistics Canada on Tuesday showed that the country’s CPI inflation eased to 1.8% YoY in December from 1.9% in November. This reading was slightly below the 1.9% expected. 

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