USD/CAD price forecast: Canadian dollar gains as Trump considers softening tariffs
USD/CAD falls as markets assess potential tariff relief and BoC rate cut expectations
The USD/CAD pair has declined for the second consecutive session, trading near 1.4400 as concerns over newly imposed tariffs and slowing U.S. economic growth weigh on market sentiment. President Donald Trump’s 25% tariffs on Canadian and Mexican goods took effect on Tuesday, along with a 20% duty on Chinese imports.
However, U.S. Commerce Secretary Howard Lutnick suggested Trump may reconsider the tariffs, signaling potential relief if Canada adheres to USMCA trade rules.
Despite speculation surrounding a possible policy shift, Trump has privately expressed intent to keep tariffs in place, according to reports from The New York Times. The uncertainty has led to volatility in the Canadian Dollar (CAD), which initially dropped to 1.45, a one-month low, before rebounding as the market adjusted to potential tariff relief.
USD/CAD price analysis (Jan 2025 - Mar 2025) Source: TradingView.
Canadian Dollar Recovers Amid Bank of Canada Rate Cut Expectations
The Canadian Dollar (CAD) remains under pressure due to growing expectations of additional interest rate cuts by the Bank of Canada (BoC). Market participants have now priced in an 80% chance of a BoC rate cut next week, with some analysts forecasting a quarter-point reduction in each of the next four meetings, bringing the rate to 2.0% by July.
Meanwhile, Prime Minister Justin Trudeau announced that Canada will impose retaliatory tariffs on U.S. goods worth C$155 billion, with an additional C$125 billion in tariffs if Trump's restrictions remain in place for more than 21 days. The Bank of Canada has warned that a prolonged tariff war could reduce Canadian GDP by 3% over two years and weaken economic growth.
Technical Outlook: USD/CAD Key Levels to Watch
From a technical perspective, USD/CAD has formed a near-term trading range between 1.4370 and 1.4545. A sustained move below 1.4350 could extend losses toward 1.4200, while resistance at 1.4545 and 1.4600 remains firm. The U.S. Dollar Index (DXY) continues to hover around 105.70, with market sentiment influenced by Trump’s shifting stance on tariffs and key upcoming U.S. economic data releases, including ISM Services PMI and ADP Employment change.
As previously discussed investors monitor trade negotiations and interest rate decisions, USD/CAD will likely remain volatile in the short term. A confirmed easing of tariffs could push the pair lower, while prolonged trade uncertainty could fuel further gains for the U.S. Dollar.
