USD/CAD Gains Amid Weakening CAD and Ongoing Trade Dispute

The Canadian dollar continues to show signs of weakening momentum, with USD/CAD gaining nearly 0.7% over the last four trading sessions.

This trend can be attributed to two primary factors: expectations of a more aggressive Federal Reserve and an ongoing trade dispute that remains unresolved.

The situation at the Bank of Canada is less clear-cut, with policymakers acknowledging inflation risks but not yet signaling a more aggressive policy stance.

In contrast, the Federal Reserve continues to be seen as the institution most likely to maintain a restrictive monetary policy over the coming months, which supports the relative attractiveness of U.S. assets and could widen the gap between U.S. and Canadian bond yields.