• USD/CAD rose more than 1% to 1.4178, a level not seen since April 2020.
• The risk-sensitive CAD’s downside is fueled by dampened market sentiment.
• President-elect Donald Trump announced plans to impose a 25% tariff on imports from Canada.

The USD/CAD pair continues to climb, trading near 1.4110 during Tuesday’s Asian session, marking levels last seen in April 2020. The pair has surged over 1%, fueled by weakened market sentiment after President-elect Donald Trump announced plans to impose a 25% tariff on imports from Mexico and Canada, along with a 10% hike in tariffs on all Chinese goods entering the United States (US).

According to Reuters, citing a Canadian source familiar with the matter, US President-elect Donald Trump and Canadian Prime Minister Justin Trudeau had a conversation on Monday night, discussing trade and border security in what was described as a positive exchange. 

Separately, Canada’s Deputy Prime Minister stated that the "Canada-US relationship today is balanced and mutually beneficial, particularly for American workers." However, the statement made no reference to Trump’s threat of imposing tariffs.

A drop in crude Oil prices could pressure the commodity-linked Canadian Dollar (CAD). As the largest Oil exporter to the United States (US), Canada’s currency often moves in tandem with Oil price fluctuations. Lower crude prices typically weaken the CAD.