USD/CAD steady around 1.3950, eyes on Bank of Canada rate decision

USD/CAD stabilized around 1.3955 in early Asian trading on Wednesday. The upside for the Canadian dollar (CAD) may be limited due to dovish expectations on the Bank of Canada (BoC). The BoC's interest rate decision will be in focus later on Wednesday, with no rate move expected.

Weaker-than-expected Canadian inflation data supported bets on further rate cuts from the BoC this year, which could send the Canadian dollar lower against its U.S. counterpart. Data released by Statistics Canada on Tuesday showed that the country's consumer price index (CPI) inflation fell to 2.3% in March, down from 2.6% in February. This figure was lower than the expected 2.6%. On a monthly basis, CPI rose 0.3% in March, compared with 1.1% in the previous month and 0.7% expected.

According to a Reuters poll, investors see a 57% chance that the BoC will pause rate cuts at its April meeting on Wednesday, but expect it to resume easing in June and forecast a total of two more rate cuts by the end of 2025. Currently, the BoC's base rate is 2.75%.

U.S. President Donald Trump said on Monday he was considering revising the 25% tariff on foreign cars and auto parts imported from Mexico, Canada and other countries. Trump's decision to exempt key technology products from reciprocal tariffs and reports that he may suspend tariffs on auto imports eased market concerns about the risk of an imminent U.S. recession. This in turn could provide some support to the US dollar (USD) in the near term.