USD/CAD steadies as stronger US Dollar pressures Loonie

• USD/CAD holds steady as a firm US Dollar keeps the Loonie on the defensive.
• Markets reassess US trade policyfollowing SCOTUS decision.
• Markets look ahead to Canada’s Q4 GDP report due on Friday.

USD/CAD trades flat on Tuesday as a firmer US Dollar (USD) keeps the Canadian Dollar (CAD) under pressure. At the time of writing, the pair is trading around 1.3722, up around 0.15% on the day.

The Greenback is showing signs of resilience despite lingering uncertainty around US trade policy, after the US Supreme Court ruled last week that President Donald Trump’s use of the International Emergency Economic Powers Act (IEEPA) to impose sweeping tariffs was unlawful.

Following the ruling, President Trump invoked Section 122 of the Trade Act of 1974, announcing a temporary 10% flat tariff on imports from all countries, which takes effect on Tuesday.

Meanwhile, easing expectations for near-term Federal Reserve (Fed) rate cuts are also supporting the US Dollar. Recent US economic data showed slower fourth-quarter Gross Domestic Product (GDP) growth alongside firm Personal Consumption Expenditures (PCE) inflation readings, reinforcing the view that the central bank may opt to keep rates unchanged in the coming months.

Chicago Fed President Austan Goolsbee said on Tuesday that he remains optimistic there could be additional rate cuts this year, but stressed that policymakers need clearer evidence that inflation is moving back toward the 2% target.

Goolsbee added that “inflation progress has stopped” and that it is “not obvious that Fed policy is even restrictive.” He also noted that economic growth and the labor market “don’t seem especially fragile.”

On the data front, the ADP Employment Change four-week average edged up to 12.8K from 11.5K previously. US Conference Board Consumer Confidence rose to 91.2, beating the 87.1 forecast and improving from the prior 84.5 reading, which was revised up to 89.

Attention now turns to President Donald Trump’s State of the Union address on Wednesday, where investors will look for fresh signals on trade policy.

In Canada, the economic calendar remains virtually empty in the near term, leaving traders focused on the upcoming fourth-quarter annualized GDP data due on Friday.

The Bank of Canada (BoC) is widely expected to keep interest rates on hold through 2026. However, officials have acknowledged that uncertainty remains elevated, with US trade tensions continuing to weigh on the sentiment. Policymakers have stressed that risks are being monitored closely and that the central bank stands ready to adjust policy if the outlook shifts.

Traders are also closely monitoring escalating US-Iran tensions, which have injected fresh volatility into Oil markets. Given Canada’s status as a major crude exporter, swings in Oil prices remain a key driver for the Loonie.

At the time of writing, WTI crude is trading around $65.80, down roughly 0.90% on the day, easing from its highest level since August 2025.