USD/CAD slips to 1.3880 as Trump pauses 50% Canada tariffs for three days

USD/CAD fell roughly 20 pips from around 1.3900 to near 1.3880 after President Trump announced a three-day pause on the 50% tariffs on Canadian goods that were scheduled to take effect at midnight US Eastern time. Trump indicated a tentative deal has been reached, easing immediate trade-war risk premium that had been built into the Canadian dollar. The relief move was modest in scale, reflecting trader caution given the short duration of the reprieve and the absence of a finalised agreement. Trade policy remains the dominant driver for the loonie, overshadowing domestic fundamentals in the near term. Technically, USD/CAD support sits at the 1.3860-1.3880 area, with a sustained break opening scope toward 1.3800, while failed negotiations would likely trigger a swift retest of 1.3900 and beyond toward recent highs. Traders should note the risk of headline-driven gaps and widened spreads around the new deadline, and consider that CAD strength may also be capped by oil price dynamics and diverging Bank of Canada and Federal Reserve policy expectations.