USD/CAD faces pressure above 1.4300 on optimism over Russia-Ukraine peace

USD/CAD falls below 1.4300 as the market sentiment turns risk-on amid optimism over the Russia-Ukraine truce.
The outlook of the US Dollar remains firm on expectations that the Fed will hold interest rates for longer.
Investors expect the BoC to continue reducing interest rates further.

The USD/CAD pair falls below the key level of 1.4300 in Thursday’s European session. The Loonie pair faces selling pressure as the US Dollar (USD) is underperforming its peers amid risk-on market sentiment. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, slumps to near 107.50.

US Dollar PRICE Today

The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the strongest against the Australian Dollar.

	USD	EUR	GBP	JPY	CAD	AUD	NZD	CHF
USD		-0.25%	-0.39%	-0.40%	0.08%	0.25%	0.14%	-0.70%
EUR	0.25%		-0.14%	-0.16%	0.32%	0.48%	0.38%	-0.45%
GBP	0.39%	0.14%		-0.04%	0.46%	0.64%	0.53%	-0.31%
JPY	0.40%	0.16%	0.04%		0.48%	0.66%	0.50%	-0.30%
CAD	-0.08%	-0.32%	-0.46%	-0.48%		0.19%	0.06%	-0.78%
AUD	-0.25%	-0.48%	-0.64%	-0.66%	-0.19%		-0.12%	-0.95%
NZD	-0.14%	-0.38%	-0.53%	-0.50%	-0.06%	0.12%		-0.83%
CHF	0.70%	0.45%	0.31%	0.30%	0.78%	0.95%	0.83%

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).

Market sentiment turned cheerful as United States (US) President Donald Trump confirmed on Wednesday that both leaders of Russia and Ukraine have agreed to talk about ending a three-year-long war. This scenario has resulted in cooling geopolitical tensions, which has improved demand for risk-perceived assets.

However, the outlook of the US Dollar remains firm as investors brace for reciprocal tariffs from Trump. Also, deepening expectations that the Federal Reserve (Fed) will keep interest rates at their current levels for longer due to accelerating pressures would bring the US Dollar on the front foot.

Donald Trump is poised to announce reciprocal tariffs later in the day. During the election campaign, Trump said that he would implement a policy of “an eye for an eye, a tariff for a tariff, same exact amount.”

Though the Canadian Dollar (CAD) outperforms the US Dollar, it is underperforming other peers on firm expectations that the Bank of Canada (BoC) will continue reducing interest rates. The BoC reduced its key borrowing rates by 25 basis points (bps) to 3% last month. BoC Governor Tiff Macklem stated that economic uncertainty amid Trump tariff fears supports their dovish interest rate decision.

US Dollar FAQs

What is the US Dollar?

The US Dollar (USD) is the official currency of the United States of America, and the ‘de facto’ currency of a significant number of other countries where it is found in circulation alongside local notes. It is the most heavily traded currency in the world, accounting for over 88% of all global foreign exchange turnover, or an average of $6.6 trillion in transactions per day, according to data from 2022. Following the second world war, the USD took over from the British Pound as the world’s reserve currency. For most of its history, the US Dollar was backed by Gold, until the Bretton Woods Agreement in 1971 when the Gold Standard went away.

How do the decisions of the Federal Reserve impact the US Dollar?

The most important single factor impacting on the value of the US Dollar is monetary policy, which is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability (control inflation) and foster full employment. Its primary tool to achieve these two goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, the Fed will raise rates, which helps the USD value. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates, which weighs on the Greenback.

What is Quantitative Easing and how does it influence the US Dollar?

In extreme situations, the Federal Reserve can also print more Dollars and enact quantitative easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used when credit has dried up because banks will not lend to each other (out of the fear of counterparty default). It is a last resort when simply lowering interest rates is unlikely to achieve the necessary result. It was the Fed’s weapon of choice to combat the credit crunch that occurred during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy US government bonds predominantly from financial institutions. QE usually leads to a weaker US Dollar.

What is Quantitative Tightening and how does it influence the US Dollar?

Quantitative tightening (QT) is the reverse process whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing in new purchases. It is usually positive for the US Dollar.