USD/CAD conquers 1.4000 on Trump’s clean sweep

• USD/CAD climbs above 1.4000 as Donald Trump would be able to implement policies smoothly.
• Trump’s policies would force the Fed to slow down its rate-cut cycle.
• The BoC is expected to cut interest rates again by 50 bps.

The USD/CAD pair visits the psychological figure of 1.4000 in Thursday’s European session for the first time in more than four years. The Loonie asset strengthens as the US Dollar (USD) extends its rally on firm expectations that President-elected Donald Trump will be able to implement trade and fiscal policies smoothly. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, posts a fresh annual high near 107.00.

Trump vowed in his election campaign that he would raise import tariffs and reduce taxes on corporations and workers, a scenario that will boost economic growth and inflationary pressures. An acceleration in price pressures would limit the Federal Reserve’s (Fed) potential for following an aggressive interest rate cut approach.

Market experts believe that the Fed could pause its policy-easing cycle at the start of the next year. For the December meeting, traders see a 79% chance that the Fed will cut interest rates by 25 basis points (bps) to 4.25%-4.50%, according to the CME FedWatch tool.

For fresh interest rate cues, investors will pay close attention to Fed Chair Jerome Powell’s speech, which is scheduled at 20:00 GMT.

Domestically, the Canadian Dollar (CAD) is also going through a rough time as investors expect the Bank of Canada (BoC) to cut interest rates again by 50 basis points (bps) to 3.25%. This will be the first interest rate cut and the second of a larger-than-usual size in a row.