The USD/CAD currency pair remained stuck within a narrow range on Tuesday, as market players weighed tariff concerns and the Federal Reserve’s rate cut trajectory.
The Trump administration has already imposed a 10% tariff on imports from China, announced and postponed 25% tariffs on imports from Mexico and non-energy imports from Canada and is also intending to impose reciprocal tariffs on all countries that tax US imports.
Market focus now sets on the minutes of the Federal Reserve’s January meeting due on Wednesday for clues over how policy makers have weighed the risk of a broader tariff war.
“Trade policy uncertainty is at a record high … and given that the labour market is solid, there is no compelling case to cut rates imminently,” ANZ strategists wrote in an investor note.
“An extended pause during the first half of this year looks justified and will give the Fed time to assess the impact of trade measures on inflation.”
ANZ now forecasts 75 basis points of rate cuts this year.
Yesterday Fed Governor Michelle Bowman said that greater confidence inflation might ease further this year was needed before reducing interest rates again.
Meanwhile, market players will also be looking into Canadian CPI inflation data for January due out later today.
The median CPI inflation probably picked up to 2.5% in January, according to market consensus.
The trimmed-mean core inflation rate, the Bank of Canada’s preferred measure of underlying inflation, probably rose to 2.6% in January from 2.5% in December.
The USD/CAD currency pair was last inching up 0.08% to trade at 1.4190.
TradingPedia.com is a financial media specialized in providing daily news and education covering Forex, equities and commodities. Our academies for traders cover 
