USD/CAD remains below 1.4450 ahead of Bank of Canada rate decision, market focuses on rate cut expectations

USD/CAD was slightly lower during the U.S. session on Monday evening, closing at 1.4435, snapping a two-day rally. The market is concerned about the slowdown in the US economy and uncertainty over tariff policies, which could put pressure on the US dollar (USD). Investors awaited the Bank of Canada's (BoC) interest rate decision on Wednesday, amid expectations it will ease monetary policy further.

A possible slowdown in the U.S. economy, coupled with a continued sell-off on Wall Street, weighed on the U.S. dollar against the Canadian dollar. Weaker-than-expected U.S. jobs data for February also suggested that despite the Federal Reserve's cautious stance, multiple interest rate cuts are still likely this year. Traders expect the Fed to cut interest rates by 75 basis points this year and have fully priced in the June cut, according to LSEG.

Investors will be closely watching the upcoming U.S. Consumer Price Index (CPI) data for new clues on the direction of inflation. Markets are hoping that inflation data will show signs of cooling, despite a slight pickup in January.

On the other hand, the market generally expects the Bank of Canada to cut its benchmark interest rate by 25 basis points to 2.75% at its March meeting on Wednesday. CIBC analysts predict that if trade uncertainty persists, the Bank of Canada is likely to continue cutting interest rates, which would put further pressure on the Canadian dollar. However, such expectations are likely to limit the downside for USD/CAD in the near term.

In addition, falling crude oil prices are also a major pressure on the Canadian dollar. As the largest oil supplier to the United States, Canada is extremely sensitive to fluctuations in crude oil prices. In the near term, due to the increase in production and tariff uncertainties among OPEC+ producers, the Canadian dollar may come under some selling pressure, further dragging down its performance.