A Larger BOC Rate Cut Due to Tariff War Can Send USDCAD to 1.45
USD/CAD has been very volatile recently and today the BOC could cut rates by more than 25%, which could propel it to 1.45.
BoC Faces Pressure to Cut Rates Amid Tariff Uncertainty
While markets widely expect the Bank of Canada (BoC) to cut rates by 25 basis points, there is increasing speculation that policymakers may opt for a larger 50 basis point cut. The central bank is likely to take a cautiously dovish approach as it assesses the full economic impact of new U.S. tariffs on Canadian exports.
USD/CAD Chart Daily – The 100 SMA Keeping It Supported
President Donald Trump imposed a 25% tariff on Canadian steel and aluminum imports, set to take effect tomorrow. The move was triggered by Ontario Premier Doug Ford’s proposal for an electricity tax and threats to halt power exports to the U.S.. However, following last-minute negotiations, Ford revoked the electricity surcharge, leading Trump to withdraw the tariffs—at least for now.
In a joint statement, Ford and U.S. Commerce Secretary Lutnick confirmed that they will meet again on Thursday to discuss compliance with existing trade agreements or a potential renegotiation of the USMCA trade deal.
Canadian Politics & Market Reaction
Canada’s political landscape also shifted, with former Bank of Canada Governor Mark Carney winning the Liberal Party leadership race, replacing Justin Trudeau as Prime Minister. There is growing speculation that Carney may call for early federal elections, adding further political uncertainty to the mix.
Following the initial tariff announcement, USD/CAD surged past 1.45, but later gave up its gains, retreating to 1.4370 before stabilizing near 1.4427. The currency pair is once again trading above key resistance levels, with the risk skewed toward further upside.
Outlook for USD/CAD
If trade tensions escalate under Carney’s leadership, USD/CAD could retest 1.45 and push even higher. However, if tensions ease and trade relations stabilize, sellers will target the 100-day SMA, currently acting as a strong support level. For now, the upside risk remains dominant, as markets await further developments in the BoC rate decision and trade negotiations.
USD/CAD Live Chart
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