USD/CAD price forecast: Canadian dollar steadies near $1.44 despite BoC rate cut and tariff risk
Canadian dollar holds near 1.44 as BoC signals cautious rate cuts amid U.S. trade tensions
The Canadian dollar (CAD) is holding steady around 1.44 per USD, navigating through market uncertainty following the Bank of Canada (BoC) rate cut and escalating U.S. trade tensions. Despite a 25-basis-point cut that lowered the policy rate to 2.75%, the loonie has shown resilience, reflecting the market’s expectation that the BoC will continue easing cautiously.
The Canadian economy faces headwinds from U.S. tariffs on steel and aluminum, while retaliatory Canadian tariffs worth $21 billion on U.S. goods add to economic uncertainty.
USD/CAD price forecast (Jan 2025 - Mar 2025) Source: TradingView.
BoC signals cautious policy amid tariff-driven risks
The BoC’s rate cut was widely anticipated, marking the seventh consecutive reduction, bringing the total easing since June 2024 to 225 basis points. However, BoC Governor Tiff Macklem emphasized that further rate cuts would be approached carefully, given the complex dynamics of inflationary pressures from tariffs and demand-side weaknesses. The central bank maintained its estimate of a neutral rate at 2.75%, signaling that rates could be lowered further if trade conflicts persist.
Markets are now pricing in another 50 basis points of cuts by year-end, with expectations that the policy rate may reach 2.00%. However, analysts remain divided, as Canadian economic data, inflation trends, and tariff negotiations will play a crucial role in determining the BoC’s next steps.Trade war concerns weigh on market sentiment
President Donald Trump’s decision to impose 25% tariffs on steel and aluminum imports has heightened trade uncertainty, with the European Union (EU) threatening countermeasures worth €26 billion. The BoC has warned that these developments could erode business confidence and restrain investment and hiring in Canada.
The USD/CAD pair remains volatile, fluctuating between 1.4350 and 1.45, as markets digest the potential easing of U.S.-Canada trade tensions. Some analysts, including Danske Bank, expect the USD/CAD exchange rate to decline toward 1.41 in the short term, as the U.S. dollar weakens and CAD benefits from possible tariff negotiations.
Technical outlook and USD/CAD price prediction
The USD/CAD exchange rate has been testing key resistance levels in the 1.4450-1.4500 zone, with downside support near 1.4350. If USD/CAD breaks below 1.4350, a decline toward 1.42-1.41 is likely. However, if bullish momentum resumes, resistance near 1.45 could be tested again.Technical indicators suggest mixed signals, with short-term trends favoring CAD strength, while broader USD momentum remains intact. Traders should watch for tariff developments, inflation trends, and the upcoming BoC Monetary Policy Report in April, which may offer further insight into the central bank’s long-term rate path.
The Canadian dollar held near 1.44 per USD, hovering close to the one-month low of 1.45, as Canada imposed 25% retaliatory tariffs on U.S. goods in response to Trump’s trade policies. The BoC’s rate cut to 2.75% aims to offset the economic slowdown, but shifting U.S. tariff policies continue to erode business confidence.
Also as previously discussed, Inflation is projected to rise to 2.5% in March, while markets anticipate another 50bps of cuts by year-end as the BoC adopts a cautious stance amid trade-related risks.
