USD/CAD loses momentum to near 1.4430 in Tuesday’s late American session.
New tariffs on Canadian steel and aluminum will be 25%, not 50%, the White House said.
The BoC is expected to deliver a 25 basis points (bps) interest rate cut at its March meeting on Wednesday.
The USD/CAD pair trades in negative territory around 1.4430 during the late American session on Tuesday. Uncertainty surrounding the US President Donald Trump administration's trade policy and US recession concerns continue to undermine the US Dollar (USD) against the Canadian Dollar (CAD). Traders brace for the US February Consumer Price Index (CPI) inflation report and the Bank of Canada (BoC) interest rate decision on Wednesday.
Trump reversed his decision to double tariffs on Canadian steel and aluminum to 50%, which he announced late Tuesday. The White House confirmed to Reuters that new 25% tariffs on all imported steel and aluminum will still go into effect on Wednesday, including against allies and major US suppliers Canada and Mexico.
The US Dollar Index (DXY), a measure of the USD's value relative to its most significant trading partners' currencies, declines to new multi-month lows near 103.20 amid the likelihood of a US economic slowdown. The US February CPI inflation report will be in the spotlight on Wednesday. The headline CPI inflation is expected to cool down in February after accelerating in January. If the report shows a softer-than-expected outcome, this could exert some selling pressure on the Greenback against the CAD in the near term.
On the Loonie front, financial markets put the odds of another quarter-point rate cut this week at around 80%, according to LSEG data. That would bring the policy rate to 2.75% from 3.0%. Investors expect at least two further reductions by the end of 2025. The rising speculation of further BoC rate reductions could undermine the CAD and help limit the pair’s losses.
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