USD/CAD to tick down to 1.41 in the near term – Danske Bank

Today, focus in CAD FX space turns to the BoC meeting at 14:45 CET - where markets and consensus favour a 25bp rate cut, Danske Bank's FX analysts Kristoffer Kjær Lomholt and Filip Andersson report. 

Any easing on tariffs to act as a CAD positive

"We also anticipate a 25bp rate cut, bringing the policy rate to 2.75%, as we expect the BoC to ensure that the Canadian economy is well-padded against the impact of US tariffs. Note that it is an interim meeting without a new MPR, but focus will remain on tariffs, which continues to weigh heavily on USD/CAD." 

"This was evident in yesterday's session, with the cross surpassing the 1.45-mark following Trump's remarks about doubling tariffs on all imported steel and aluminium products from Canada after Ontario announced that it would maintain its electricity levy until US tariffs were removed." 

"However, the pair concluded the session lower around 1.44 amid news that Trump is 'probably' going to reduce the recently increased tariffs on Canada after Ontario suspended its surcharge on electricity exports to the US. We forecast USD/CAD to tick down to 1.41 in the near term, given stretched short CAD positioning and further USD-weakness. Any easing on tariffs would act as a CAD positive, while more hawkish tones from the BoC would also support our short-term view."