The USD/CAD pair has softened to approximately 1.3660 during the early Asian session on Tuesday. A significant jobs report could face postponement as a result of a partial US government shutdown. Concerns regarding US trade policy and the forthcoming CUSMA review may exert pressure on the Loonie. The USD/CAD pair is currently positioned in negative territory, hovering around 1.3660 in the early hours of the Asian session on Tuesday. Another US government shutdown undermines the US Dollar against the Canadian Dollar. However, the potential decline for the pair could be constrained given the positive US economic indicators.
On Monday, US President Donald Trump urged the House to bring an end to the partial government shutdown. However, neither Republicans nor Democrats seemed prepared to endorse the funding package he negotiated with the Senate without first discussing their own requirements concerning immigration enforcement operations. The Bureau of Labor Statistics has halted data collection and processing, resulting in a postponement of the January employment report along with other significant economic releases.
US manufacturing activity has shown significant expansion, the highest since 2022, potentially strengthening the Greenback relative to the CAD. The US Manufacturing Purchasing Managers’ Index increased to 52.6 in January, up from 47.9 in December, as reported by the Institute for Supply Management. This figure exceeded the market consensus of 48.5.”The domestic story coming from the U.S. was also supportive for the dollar in terms of that big surprise from the ISM,” stated Rodrigo Catril.
The Bank of Canada maintained the overnight rate at 2.25% during its January policy meeting, indicating stability in its monetary approach regarding the Loonie. This marks the second consecutive meeting in which rates have been held steady. BoC Governor Tiff Macklem highlighted increased uncertainty stemming from erratic US trade policies, geopolitical risks, and the forthcoming assessment of the Canada-US-Mexico Agreement. Persistent worries about US trade policy and the imminent CUSMA review may exert downward pressure on the CAD, potentially providing support for the pair.