- USD/CAD struggles following a US-EU trade agreement, which has eased fears of a broader trade conflict.
- The US and EU have agreed to impose a 15% tariff on EU exports to the United States.
- President Trump does not expect a trade deal with Canada to be finalized before the August 1 deadline.
USD/CAD depreciates after two days of losses, trading around 1.3700 during the Asian hours on Monday. The pair loses ground as the US Dollar (USD) as the market sentiment improves following the trade deal between the United States (US) and the European Union (EU).
The United States and European Union reached a framework trade agreement on Sunday, affecting nearly one-third of global trade, introduces a 15% tariff on EU exports to US and includes commitments from the bloc to increase purchases of US energy products and military equipment. The deal has ended a months-long stand-off, taking effect on August 1.
Additionally, market sentiment improves as US and China are expected to extend their tariff truce by another three months, according to a source cited by the South China Morning Post (SCMP) on Sunday. Traders await further development on the meeting between US Treasury Secretary Scott Bessent and Chinese Vice Premier He Lifeng, scheduled on Monday in Stockholm.
Traders also keep their eyes on the US Federal Reserve’s (Fed) interest rate decision due on Wednesday. The US central bank is widely expected to keep benchmark interest rate steady between 4.25% and 4.50% at its July meeting. The FOMC press conference will be observed for any signs that rate cuts may start in September. Markets have priced in nearly a 62% odds of a rate cut in September, according to the CME Group’s FedWatch tool.
US President Donald Trump stated that he does not expect to finalize a trade deal with Canada ahead of August 1 deadline. “We haven’t really had a lot of luck with Canada,” Trump told reporters last week. “I think Canada could be one where there’s just a tariff, not really a negotiation.” Prior to that, Canadian Prime Minister Mark Carney indicated that Canada “will not accept a bad deal” and rush into an agreement, per BBC.
