USD/CAD Falls Below 1.3700, Hits New Year-to-Date Low Amid USD Weakness

USD/CAD Falls Below 1.3700, Hits New Year-to-Date Low Amid US Dollar Weakness

The USD/CAD currency pair extended its downward trend early Monday during the Asian session, slipping below the key psychological support level of 1.3700. This marks the lowest level for the pair since October 2024, driven largely by ongoing weakness in the US dollar.

The US Dollar Index (DXY), which tracks the greenback against a basket of major currencies, fell to nearly a one-month low. The decline reflects growing concerns over the US fiscal outlook, which continues to deteriorate amid expectations of significant fiscal stimulus. A sweeping tax cut and spending bill championed by President Donald Trump is projected to increase the US deficit by around $4 trillion over the next decade, exacerbating worries about the nation’s debt.

In addition, recent economic data, including softer Consumer Price Index (CPI) and Producer Price Index (PPI) readings, suggest easing inflationary pressures. This has reinforced market expectations that the Federal Reserve may cut interest rates further by the end of the year to support economic growth.

These factors combined are weighing heavily on the US dollar and, consequently, putting downward pressure on the USD/CAD pair. Meanwhile, the Canadian dollar, or Loonie, finds support despite softer oil prices, due in part to diminishing prospects for a Bank of Canada rate cut in June.

Investors will be watching for upcoming economic data and central bank signals that could influence the future trajectory of USD/CAD.