USD/CAD gauges temporary support near 1.4400 after US CPI, BoC’s policy decision

• USD/CAD looks for an interim support near 1.4400 after the release of the US inflation data for February and the BoC’s monetary policy decision.
• Cooling US inflation is expected to prompt Fed dovish bets.
• The BoC cut interest rates by 25 bps to 2.75%, as expected, and guided a dismal economic outlook.

The USD/CAD pair looks for temporary support near the key level of 1.4400 during North American trading hours on Wednesday after the release of the United States (US) Consumer Price Index (CPI) data for February and the Bank of Canada’s (BoC) interest rate decision.

The US CPI report showed that year-on-year headline and core inflation decelerated at a faster-than-expected pace to 2.8% and 3.1%, respectively. On a monthly basis, both headline and core CPI rose at a moderate pace of 0.2%, compared to estimates of 0.3%. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, moved higher to near 103.75  after the US inflation data release from the four-month low of 103.20 refreshed on Tuesday.

The recovery move in the Greenback appears to be short-lived as cooling inflationary pressures is the unfavorable scenario for the US Dollar (USD), knowing that soft inflation data boosts Federal Reserve (Fed) dovish bets.

Meanwhile, the Canadian Dollar (CAD) gained after the BoC reduced its key borrowing rates by 25 basis points (bps) to 2.75%, as expected. Traders were increasingly confident about the BoC easing its monetary policy further amid growing worries over the Canadian economic outlook due to the tariff war with the US.

On Tuesday, Canada’s Ontario Premier Doug Ford agreed to roll back the 25% surcharge levied on electricity exported to the US after President Donald Trump threatened to impose additional 25% tariffs on imports of aluminum and steel from Canada. Earlier this month, Trump imposed 25% tariffs on Canada for allowing drugs into the US through borders.

After the policy decision, Boc Governor Tiff Macklem warned that heightened “trade tensions” could disrupt “job market recovery”. Macklem warned that US tariffs will likely “increase inflationary pressures in Canada and curb growth”. He guided a moderate growth in the January-March period as trade conflict weighs on “sentiment and activity”.