USD/CAD falls to near 1.4300 due to political and trade-related developments in Canada

• USD/CAD depreciates as the CAD gains support following the news of PM Trudeau’s resignation.
• Canada is considering advancing the release of retaliatory tariffs on US goods.
• The US Dollar corrects downwards ahead of ISM Services PMI due later in the day.

The USD/CAD pair remains subdued as the Canadian Dollar (CAD) receives support from news that Canadian Prime Minister Justin Trudeau would announce his plans to step down but said it expected to happen before an emergency meeting of Liberal legislators on Wednesday. The USD/CAD pair trades around 1.4310 during the European hours on Tuesday.

The Canadian media outlet “The Globe and Mail” published a gated report on Tuesday, stating that Canada’s federal government is considering an early release of a proposed list of American goods that would face retaliatory Canadian tariffs. This move would be in response to potential tariffs imposed by incoming US President Donald Trump on Canadian products.

However, lower crude Oil prices might have put downward pressure on the commodity-linked CAD, given that Canada is the largest Oil exporter to the United States (US). West Texas Intermediate (WTI) Oil price extends its losses for the second successive session, trading around $72.90 per barrel at the time of writing.

However, Oil prices may find support as the Organization of the Petroleum Exporting Countries’ (OPEC) Oil production declined in December, primarily due to the United Arab Emirates' (UAE) efforts to implement supply cuts to stabilize global Oil markets, according to Bloomberg (gated).

Traders are expected to closely monitor the release of Canada’s Ivey Purchasing Managers Index (PMI) data on Tuesday, along with the US ISM Services PMI. Attention will then shift to the Minutes from the Federal Reserve’s (Fed) December policy meeting, scheduled for release on Wednesday.

On Monday, the seasonally adjusted S&P Global US Services PMI Business Activity Index climbed for the second consecutive month in December, reaching a 33-month high of 56.8, up from 56.1 in November. Meanwhile, the S&P Global US Composite PMI Output Index rose to 55.4 in December, compared to 54.9 in November. This latest reading indicated a significant monthly increase in business activity, marking the fastest expansion since April 2022.

The US Dollar (USD) may find some support following President-elect Donald Trump's comments that his tariff policy will not be scaled back. Trump also refuted a Washington Post report suggesting his team was considering limiting the scope of his tariff plan to only cover specific critical imports.