• In Tuesday’s early Asian session, the USD/CAD rate remains unchanged near 1.4355.
• Investors were waiting for recent catalysts for US interest rate policy and potential tariffs under Donald Trump.
• Higher oil prices could lift the commodity-linked Loonie, but the Fed’s cautious stance could limit its rise.

In early Asian trading on Tuesday, the USD/CAD pair is holding steady around 1.4355. This is likely to be a peaceful trading session in a holiday-shortened week with low trading volumes. Later Friday, the December ISM Manufacturing Managers Index (PMI) in the US will be in focus.

At its December meeting, the Federal Reserve (Fed) cut interest rates by 25 basis points (bps), raising the target interest rate range to 4.25% and 4.5%. The Summary Economic Outlook (SEP) revealed that Fed officials have planned just two 25-basis-point rate cuts in 2025, down from four projected in September. The expectation of fewer cuts in 2025 will likely escalate the value of the US dollar relative to the Canadian dollar (CAD) in the near term.

Markets are bracing for major changes in U.S. policy, including potential tariffs, deregulation and tax changes, in 2025 when President-elect Donald Trump returns to the White House in January. Last month, Trump said he planned to impose 25% tariffs on Canada and Mexico unless those countries reduce the flow of migrants and fentanyl into the United States. Concerns about the risk of recent trade tariffs being imposed may weigh on Loonie and negatively impact USD/CAD rates.

However, a rebound in oil prices could support limit CAD’s losses. It is worth noting that Canada is the largest exporter of oil to the United States (US), and higher oil prices tend to have a positive impact on the value of CAD.