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USD/CAD was trading slightly lower around 1.3870 during Thursday’s Asian trading session, having risen around 0.50% the previous day. The pair came under pressure from a weaker U.S. dollar (USD) as the Federal Reserve’s April Beige Book pointed to worsening economic conditions.
The report highlighted growing concerns about tariffs, which have negatively impacted the economic outlook in several U.S. regions. Consumer spending appeared uneven and labor market conditions eased somewhat, with many districts noting stagnant or slight declines in employment.
Wednesday’s S&P Global PMI data also put further pressure on the dollar. The preliminary composite PMI for April fell to 51.2 from 53.5, indicating a slowdown in business activity. Although the manufacturing PMI rose slightly to 50.7, the services PMI fell sharply to 51.4, a significant drop from 54.4, reflecting weak demand in the service industry. Chris Williamson of S&P Global noted that growth momentum is weakening and persistent inflation complicates the Fed’s policy outlook.
However, USD/CAD appreciated somewhat on Wednesday as the Canadian Dollar (CAD) remained under pressure. This comes after U.S. President Donald Trump suggested the 25% tariff on Canadian auto imports into the United States could be increased. Trump highlighted efforts to reach a deal with Canada aimed at boosting U.S. auto production and reducing reliance on foreign vehicles, Reuters reported.
Meanwhile, the Canadian dollar (CAD) also faced difficulties after the International Monetary Fund (IMF) lowered its 2025 GDP growth forecast for Canada to 1.4%, renewing concerns about weakening domestic demand. Separately, the Bank of Canada (BoC) decided to keep its benchmark interest rate unchanged at 2.75%, underscoring a cautious stance, partly driven by uncertainty over potential U.S. tariffs.
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