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The USD/CAD pair remained under pressure for a second trading day, hovering around 1.3820 during the Asian session on Tuesday. The pair weakened as the Canadian dollar (CAD) strengthened slightly on initial support from the Canadian election results.
Canada’s ruling Liberal Party remained in power in Monday’s election, although it is uncertain whether they will win a majority, according to forecasts from CTV News and CBC. Prime Minister Mark Carney had sought a strong mandate to counter U.S. President Donald Trump’s tariff and annexation threats. However, CBC reported that the Liberals have yet to secure the 172 seats needed in the 343-seat House of Commons to achieve a majority.
The final result may take time to confirm, especially as the results from British Columbia may be decisive. Meanwhile, the right-leaning Conservatives performed stronger than expected, advocating for change after more than nine years of Liberal leadership. If Carney ends up leading a minority government, he will need to negotiate with other parties to maintain power – a situation that has historically resulted in Canadian governments typically lasting no more than 2.5 years.
Despite the strength of the Canadian dollar, further downside in USD/CAD may be limited by the resilience of the broader U.S. dollar (USD). The dollar found support on signs of easing trade tensions between the U.S. and China. U.S. President Donald Trump expressed a willingness to withdraw tariffs on China, while Beijing announced tariff exemptions for certain U.S. goods, raising hopes that the prolonged trade war between the world’s two largest economies may be nearing an end.
President Trump noted that progress had been made and that he had spoken with Chinese President Xi Jinping. However, a spokesperson for the Chinese Embassy strongly denied any ongoing negotiations, saying that “there are no consultations or negotiations between China and the United States on tariffs” and urged Washington to “stop creating chaos.”
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