USD/CAD erases Trump tariff-induced decline as CAD rebounds

USD/CAD has fully retraced its earlier gains sparked by Trump's tariff threats, with the Canadian dollar staging a notable recovery in what traders are calling the 'TACO trade' (Tariff-Affected Currency Opportunity). The pair surged initially on concerns that potential US tariffs could harm Canadian exports, particularly in the energy and automotive sectors. However, the loonie's resilience emerged as markets reassessed the actual likelihood and timing of tariff implementation. Oil prices, a key driver for CAD strength, have also provided support as WTI crude maintains levels above key technical supports. The reversal highlights how quickly sentiment can shift in currency markets when geopolitical rhetoric meets economic reality. Traders are now watching the 1.3700 level as a pivotal point, with a break below potentially accelerating CAD gains toward 1.3650. The episode underscores the importance of not overreacting to political headlines without concrete policy details.