The USD/CAD pair demonstrates slight upward movement, trading near 1.3835 in the early hours of the Asian session on Tuesday. However, the potential for a renewed US trade conflict with Europe may exert pressure on the Greenback in relation to the Canadian Dollar. Market participants are closely monitoring the upcoming address by US President Donald Trump at the World Economic Forum in Davos, Switzerland, on Wednesday for potential new insights.
USD/CAD is experiencing slight increases, hovering around 1.3835 during the early hours of Wednesday’s Asian session. Tensions between the US and Europe regarding Greenland could limit the potential appreciation of the US Dollar. The probability of the Bank of Canada maintaining its current position on January 28 stands at approximately 88%. US President Donald Trump has issued a warning regarding the potential imposition of tariffs on eight European nations that are in opposition to his intentions to take control of Greenland. The increase would reach 25% in the absence of an agreement by June 1. European Union leaders are set to gather in Brussels for an emergency summit on Thursday.
White House threats to Europe regarding the future of Greenland could potentially initiate the so-called “Sell-America” trade, which may lead to a broader decline in the US Dollar. “We’re observing the U.S. dollar facing significant challenges, and clearly, the Canadian dollar is reaping the rewards from this shift,” stated Rahim Madhavji. “The market appears to be unsettled by the actions of the U.S. administration.” According to Statistics Canada on Monday, Canada’s annual Consumer Price Index inflation increased to 2.4% in December, up from 2.2% in November. In December, the CPI experienced a decline of 0.2% on a monthly basis, contrasting with a rise of 0.1% noted in the prior reading.
Meanwhile, the core inflation measures, which the Bank of Canada closely monitors, continued to show signs of moderation in December. Experts generally anticipate that the BoC will maintain the current rate during the January 28 decision and likely throughout much of 2026, given the varied economic landscape.