USD/CAD slipped to around 1.3665 in Asian trading on Monday, keeping the Canadian Dollar stronger than 1.3650. Trading was driven by uncertainty over US tariffs and moves in crude oil. Markets are also watching the US Producer Price Index (PPI) for January, due on Friday.
The US Supreme Court struck down tariffs imposed under the International Emergency Economic Powers Act (IEEPA). In response, President Donald Trump announced a broad 15% tariff on imports, which pressured the US Dollar.
Tariff Policy Uncertainty
Most Canadian exports were already exempt from the IEEPA tariffs. The court ruling did not change product-specific tariffs that affect Canada.
Crude oil swings also mattered, because they often move the commodity-linked Canadian Dollar. The New York Times reported on Sunday that Trump is considering limited airstrikes on Iran.
Trump said a larger attack could follow in the coming months if diplomacy—or any initial targeted US action—does not meet his demand that Iran abandon its nuclear programme. The next round of US-Iran talks is scheduled for Thursday in Geneva.
Rising uncertainty could push USD/CAD lower and create opportunities for derivative trades. Unpredictable US tariff policy and higher Middle East tensions point to more volatility in the coming weeks. Traders should be ready for sharp moves, especially around Thursday’s US-Iran talks.
Strategy Implications For Usd Cad
The new 15% blanket US import tariff is a major headwind for the US Dollar. The targeted tariffs of 2018–2019 already unsettled markets, and a broader, more aggressive policy could further weaken confidence in the dollar. This kind of self-inflicted pressure can make it attractive to sell USD against commodity-linked currencies.
At the same time, the risk of conflict with Iran could lift crude oil prices, which tends to support the loonie. A recent example is early 2022, when geopolitical tensions in Europe pushed Brent crude up more than 25% in two weeks. With energy products making up about 27% of Canada’s total exports in 2025, a sustained rise in oil would likely be a strong tailwind for the Canadian dollar.
Given these factors, traders may consider buying USD/CAD put options with expiries over the next several weeks. This provides defined risk while positioning for a potential drop in the pair. Higher oil prices or more erratic US trade policy could support the trade, while the option premium limits losses if tensions ease unexpectedly.
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