USD/CAD Remains On The Defensive Below 1.3850 Amid Fed Independence Fears

Photo by Michelle Spollen on Unsplash

  • USD/CAD remains under pressure around 1.3835 in Tuesday’s early Asian session. 
  • Concerns about the Fed’s independence and US economic slowdown drag the US Dollar lower. 
  • Lower crude oil prices might weigh on the Loonie and cap the pair’s downside. 

The USD/CAD pair loses ground to near 1.3835 during the early Asian session on Tuesday. The US Dollar (USD) weakens against the Canadian Dollar (CAD) amid fears of a slowdown in the US and concerns over the Federal Reserve's (Fed) independence.

White House economic advisor Kevin Hassett said on Friday that US President Donald Trump is looking into whether he can fire Fed Chair Jerome Powell. Trump noted in a Truth Social post that the economy would slow unless Powell lowered interest rates immediately. The Greenback faces some selling pressure, hitting a three-year low as traders raise questions about the Fed’s independence. 

Additionally, a lack of progress on global trade dents investor confidence. Trade tensions seemed to increase after China warned other nations not to strike any deal with the US that would hurt Beijing. “If uncertainty continues for an extended period of time — meaning multiple quarters — I think that becomes more challenging for corporate earnings and decision-making, and we’ve seen some of that in the earnings season so far,” said Robert Haworth, senior investment strategist at US Bank.

Meanwhile, a fall in Crude Oil prices on signs of progress in talks between the US and Iran could undermine the commodity-linked Loonie. It’s worth noting that Canada is the largest oil exporter to the US, and lower crude oil prices tend to have a negative impact on the CAD value. 


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