BUZZ-COMMENT-No turning point in sight for USD/CAD

Jan 20th (Reuters) - It is inauguration day and the focus for markets will be on Donald Trump’s initial policies.

The incoming U.S. president has said that he will immediately sign dozens of executive orders ranging from immigration to energy resources and potentially on trade - the latter of which is likely to be the most important for FX markets in the short run.

Given the looming risk of tariffs, the U.S. dollar has largely remained in the ascendancy against its major counterparts, while pullbacks have been promptly faded.

This has been particularly evident in USD/CAD with the pair trading at the top of the post-Fed 1.4330-1.4465 range.

Though Canadian dollar shorts are well known and owned, this has been emboldened by Trump's rhetoric towards Canada regarding tariffs. In late November, he threatened to place 25% tariffs on both Canadian and Mexican goods. Earlier this month, he said he was very serious about tariffs for both countries.

That said, while betting exchanges such as Polymarket attach a 58% chance of tariffs in the first week of Trump’s presidency on Mexico, interestingly, the probability is much lower in Canada at 36% - potentially a sign that tariff risks for USD/CAD may be somewhat underpriced.

Consequently, there is still no turning point in sight for USD/CAD, where risks remain skewed to the topside with the door open to test the 2015-2020 peaks at 1.4669-89.

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(Justin McQueen is a Reuters market analyst. The views expressed are his own.)

((justin.mcqueen@thomsonreuters.com))