USD/CAD remains above 1.3860 even as the US Dollar broadly weakens

US Dollar Weakens Amid Fed Independence Concerns

The US Dollar has experienced broad declines, pressured by renewed doubts regarding the Federal Reserve's autonomy. Despite this, the USD/CAD pair has seen only modest downward movement, with support holding above 1.3860, preserving the upward momentum established since December.

Fresh anxiety was sparked by a New York Times article revealing that the US Government has launched a criminal investigation into Fed Chair Jerome Powell. This development has reignited fears about the central bank’s ability to operate without political interference, causing the Dollar to slip against major currencies during Monday’s Asian trading hours.

Jerome Powell addressed these concerns in a video statement released soon after the news broke, describing the government’s actions as “unprecedented.” He suggested that these moves are part of a larger effort by US officials to pressure the central bank into reducing borrowing costs.

Oil Prices Hover Near Multi-Year Lows

The Canadian Dollar’s recovery has also been hampered by a slight decline in oil prices. US benchmark WTI crude fell by approximately $1, settling at $58.60 after reaching $59.60 earlier in the session. While oil, Canada’s primary export, has gained about 2% since the start of the year, prices remain 23% below their June 2025 highs.

On the economic front, recent US data was generally upbeat. The unemployment rate dropped more than anticipated, and the Michigan Consumer Sentiment Index showed improvement, reducing immediate pressure on the Federal Reserve to lower interest rates.

In contrast, Canada’s employment figures for December were mixed. The economy added 8,200 jobs, defying forecasts of a 5,000 job loss. However, the unemployment rate climbed to 6.8% from 6.5%, exceeding expectations of a smaller increase to 6.6%.