USD/CAD Slides to 1.3850 as US Dollar Weakness Deepens on Fiscal Concerns

USD/CAD Slides to 1.3850 as US Dollar Weakens on Fiscal Deficit Concerns

May 23, 2025 – The USD/CAD currency pair fell to a two-week low near 1.3850 in early Thursday trading, as the US Dollar continued its downward slide due to growing concerns over the US fiscal deficit and weaker demand for US assets.

The decline in USD/CAD comes amid increasing fears that the US fiscal deficit could widen significantly, causing concern for investors. Weak demand at a US Treasury bond auction, coupled with rising Treasury yields, has added pressure to the Greenback. The bid-to-cover ratio for US Treasury bonds fell below its six-month average, signaling a lack of confidence in US assets.

Kim Rupert, managing director of global fixed-income analysis at Action Economics, stated, “The weak auction results are in line with the tale of declining demand for U.S. assets and a ‘sell America’ trade due to fiscal concerns.”

Further exacerbating the situation, US President Donald Trump’s proposed tax bill, which aims to cut taxes and reduce federal spending, is expected to add to the US budget deficit by as much as $4 trillion over the next decade. This has raised alarms among investors about the long-term fiscal health of the US economy.

In a related development, the White House has urged Republicans to pass the tax plan, warning that inaction could be seen as a “betrayal” of the public’s trust.

As USD/CAD continues its slide, the market is now turning its focus to upcoming economic data releases later on Thursday, including the S&P Global Manufacturing and Services PMIs, the Chicago Fed National Activity Index, Initial Jobless Claims, and Existing Home Sales.

These reports will be critical in shaping the next moves in USD/CAD and providing insight into the overall health of the US economy.

From a technical standpoint, the pair’s next support level is near 1.3820, while resistance is seen at 1.3900.