The Canadian dollar’s trajectory is under scrutiny as tariff exemptions from the United States provide only transient support amid persistent concerns regarding credibility and economic vulnerabilities. Danske Bank’s FX analysts suggest that prevailing market disconnections and eroded investor sentiment may sustain downward pressure on the USD in the short term. The Bank of Canada (BoC) is anticipated to implement a preemptive rate reduction amidst ongoing trade uncertainties. This week’s economic calendar features the March inflation report on Tuesday, culminating in the pivotal BoC meeting on Wednesday. The minutes from the previous BoC meeting indicated a likely pause in March absent heightened tariff uncertainty. Given the lack of significant improvement in this uncertainty, a further 25bp “insurance” rate cut is projected. Current market pricing reflects a 28% probability of such a rate cut, suggesting a leaning towards the BoC maintaining its current stance.
