USD/CAD price forecast: Consolidation persists below $1.44 ahead of BoC rate decision
USD/CAD consolidates as traders await BoC and Fed signals
USD/CAD remains in consolidation below $1.44, with traders awaiting key economic events this week, including the Bank of Canada (BoC) policy decision and U.S. inflation data. The currency pair is struggling for direction as both the U.S. dollar and the Canadian dollar face downward pressure due to economic concerns and tariff uncertainty.
The U.S. dollar is at a four-month low, with the Dollar Index (DXY) struggling to hold above 103.50. Market sentiment has been dampened by expectations that President Donald Trump’s trade policies could slow economic growth. Analysts believe the "America First" approach will lead to inflationary pressures while also causing near-term economic turbulence.
Investors are closely monitoring the U.S. Consumer Price Index (CPI) report, scheduled for Wednesday, which is expected to show a decline in headline inflation to 2.9% and core inflation to 3.2%. If the data confirms a slowing inflation trend, markets will likely strengthen their expectations for Federal Reserve rate cuts, with the CME FedWatch tool now indicating an 82% probability of a rate cut in June, up from 54% last month.
USD/CAD price analysis (October 2024 - March 2025) Source: TradingView.
Bank of Canada rate decision in focus
The Canadian dollar (CAD) remains under pressure following Trump’s 25% tariffs on Canadian imports, although some products under the USMCA agreement have been temporarily exempted. The Bank of Canada is widely expected to cut rates by 25 basis points on Wednesday, bringing the benchmark rate to 2.75%. Analysts at Danske Bank anticipate a continued easing cycle, citing concerns over tariffs and economic headwinds.
Despite the CAD’s weakness, some analysts believe that a broader decline in the U.S. dollar could lead USD/CAD lower toward 1.41 in the coming weeks. Short positioning in CAD remains stretched, suggesting the potential for a rebound if economic sentiment improves.
As previously noted, USD/CAD has been ranging between 1.4370 and 1.4545, with markets hesitant to push the pair significantly higher amid tariff and economic concerns. A break below 1.4350 could open the door for a deeper decline toward 1.4200, while resistance remains near 1.4450.
