USD/CAD rises to near 1.3950 due to Trump’s proposed fiscal policies, lower Oil prices

• USD/CAD continues to gain ground as Trump’s potential fiscal policies could delay further rate cuts by the Fed.
• The commodity-linked CAD struggles as crude Oil prices extend their losing streak.
• Oil prices decline as proposed tariffs from Trump could dampen demand growth in China.

USD/CAD extends its winning streak for the third consecutive day, trading around 1.3950 during the European session on Tuesday. The US Dollar (USD) continues to gain strength following the confirmation of Trump’s victory in the US election.

Market analysts believe that Trump’s potential fiscal policies could stimulate investment, spending, and labor demand, potentially heightening inflation risks. This could lead the Federal Reserve (Fed) to adopt a more hawkish monetary policy, further supporting the US Dollar and the USD/CAD pair.

On Sunday, Minneapolis Fed President Neel Kashkari remarked that the US economy has demonstrated impressive resilience as the Fed works to control inflation. However, Kashkari emphasized that the Fed is "not all the way home" and will need additional evidence to ensure inflation fully returns to the 2% target before considering another rate cut.

The commodity-linked Canadian Dollar (CAD) receives downward pressure from lower crude Oil prices, given the fact that Canada is the largest Oil exporter to the United States (US). West Texas Intermediate (WTI) Oil price trades around $67.90 at the time of writing. Crude Oil prices extend losses amid the fears that a Trump administration will spark a tariff-led trade war and concerns about demand growth in China.

Traders will likely focus on the Canadian September Building Permits later in the North American session. Attention will then turn to the US inflation data set for release on Wednesday, which could provide key insights into future US monetary policy.