USD/CAD rallies beyond 1.4050 on risk aversion, lower Oil prices

• The US Dollar has rallied 0.5% since Monday to reach fresh six-month highs past 1.4050.
• The safe-haven USD appreciates as a new rift between the US and China rekindles fears of a trade war.
• Lower Oil prices, due to concerns about demand, are putting additional pressure on the CAD.
   

The US Dollar has resumed its uptrend against a weaker Canadian Dollar this week. The pair has rallied beyond 0.5% from Monday's lows to reach fresh six-month highs above 1.4050 at the time of writing.

A sourer market sentiment and growing concerns that the trade rift between the US and China may escalate into a full-blown trade war are supporting the US Dollar, which benefits from its safe-haven status, and weighing on the Loonie.

Canadian Dollar suffers amid fears of a trade war

Trade tensions between the US and China have heated up after the Asian country raised tariffs on US vessels entering its ports, a move that has been replicated by the US, which threatens to derail the fragile truce between the world's two major economies.

These moves have cooled hopes of a de-escalation of the tensions, triggered by US Secretary Scot Bessent, who announced on Monday that the US President, Donald Trump, is planning to meet his Chinese counterpart, Xi Jinping, later this month.

Concerns about global trade have pushed Oul prices lower, adding pressure to the commodity-sensitive CAD. Oil is Canada's main export, and the US benchmark WTI dropped to $58.50, weighed by concerns that further trade restrictions will reduce demand for energy in a time when producer countries are boosting their output.

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