Canadian Dollar Strengthens as Trump Pauses 50% Tariffs, Dollar Slips Ahead of FOMC Minutes

USD/CAD faced renewed selling pressure during Wednesday's Asian session, trading at 1.38812, giving back part of the rebound from its lowest level since June 3 earlier this week. The Canadian dollar's strength was primarily driven by news of Trump's pause on 50% tariffs, while the dollar remained broadly soft ahead of the FOMC minutes release.

**Tariff Pause Eases Pressure on Canadian Dollar**

The Trump administration's decision to suspend the additional 50% tariff on related products directly mitigated the short-term impact on Canada's export sector. According to market reports, U.S. trade officials had previously hinted at new tariffs on some Canadian steel and lumber products, weighing on the loonie; following the pause announcement, the Canadian dollar gained breathing room, pushing USD/CAD lower from its rebound highs. However, a significant number of key derivatives still carry the 50% tariff, and with duties calculated on the total product value, the actual tax burden on some products could rise, meaning tariff uncertainty has not been fully eliminated.

**FOMC Minutes and Rate Cut Expectations Constrain Dollar**

Traders are closely monitoring the upcoming FOMC minutes to assess the Fed's subsequent policy path. According to the CME FedWatch tool, traders currently see a 92% probability of a 25-basis-point rate cut in September, down from the fully priced-in level seen earlier last week following softer CPI data. If the minutes signal a dovish tilt or further indicate economic slowdown, it could continue to weigh on the dollar, providing additional support for the Canadian dollar; conversely, if the minutes lean hawkish, USD/CAD's downside room will be limited.

**Technical Outlook and Near-Term Focus**

USD/CAD is currently trading near 1.38812, with short-term movement constrained by the FOMC minutes and subsequent tariff developments. Market sentiment remains neutral, with investors awaiting more tariff details and confirmation of U.S. inflation trends. If tariff negotiations further ease or are postponed, the Canadian dollar could extend its rebound at support levels; if U.S. inflation data continues to exceed expectations, the dollar index may regain strength, limiting USD/CAD's decline.