USD/CAD rallies as Fed cut expectations fade, tariff fears mount

USD/CAD surged 0.6% to 1.4350, reaching a two-month high as reduced Federal Reserve rate cut expectations and escalating tariff tensions bolstered the US dollar. Markets have scaled back Fed easing bets following robust US labor market data, with futures now pricing only 25 basis points of cuts for 2025. The Canadian dollar faces additional pressure from potential US tariff threats, which could significantly impact Canada's export-dependent economy. Oil prices declining 2% to $78.50/barrel further weakened the commodity-linked CAD. The dollar index climbed to 104.50, reflecting broad USD strength. Technical analysis shows USD/CAD breaking above the 1.4300 resistance level, opening the path toward 1.4400. Support has formed at 1.4280 (previous resistance turned support). Traders are positioning for continued CAD weakness unless oil prices recover or tariff concerns ease.