USD/CAD steadies near 1.3800, downside appears due to a weaker US Dollar

• USD/CAD could face downside pressure as the US Dollar weakens, possibly due to rising trade tensions.
• President Donald Trump's proposal to impose a 100% tariff on foreign-made films has heightened fears of renewed protectionist policies.
• The Canadian Dollar is rebounding in line with other G10 currencies, supported by fading recession concerns.

USD/CAD is holding steady around the 1.3800 level during Monday's Asian session, following a decline in the previous trading day. Upside momentum for the pair may be capped as the US Dollar (USD) faces pressure, potentially due to renewed trade tensions. President Donald Trump announced plans to instruct the US Trade Representative and Commerce Department to initiate a 100% tariff on foreign-made films.

The US Dollar Index (DXY), which tracks the Greenback against six major currencies, is on the back foot for the second straight day, trading near 99.70 at the time of writing. Market participants will turn their focus to the upcoming US ISM Services PMI data for further clues on the economic outlook.

President Trump confirmed he has no intention of replacing Federal Reserve Chair Jerome Powell before his term expires in May 2026. Despite calling Powell "a total stiff," Trump reiterated his view that interest rates should eventually be cut.

On the labor front, the April Nonfarm Payrolls (NFP) report surprised to the upside, with 177,000 jobs added versus expectations of 130,000. This followed a revised increase of 185,000 in March. The unemployment rate held steady at 4.2%, while average hourly earnings grew 3.8% year-over-year, in line with the previous month.

Meanwhile, the Canadian Dollar (CAD) found support alongside other G10 currencies amid easing recession concerns. Canada's GDP showed modest growth in March, despite falling commodity prices and fears surrounding a potential trade dispute with the US. The resilience in economic data has helped bolster sentiment toward the CAD.