Forex Today: Markets take a break from tariff headlines, focus on BoC and US inflation

Here is what you need to know on Wednesday, March 12:

Following a volatile American session that was dominated by tariff headlines on Tuesday, financial markets quiet down early Wednesday. The US economic calendar will feature Consumer Price Index (CPI) data for February. Later in the day, the Bank of Canada (BoC) will announce monetary policy decisions. 

US President Donald Trump announced on Tuesday that he will impose an additional 25% tariff, in addition to the previously announced 25%, on steel and aluminum imports from Canada. In response, Ontario Premier Doug Ford announced that they will place a 25% surcharge on the electricity that they supply to more than 1 million homes in the US. Trump backed off following this development and the White House said that only the previously planned 25% tariffs on steel and aluminum products from Canada and all other countries will go into effect with no exceptions or exemptions.

Early Wednesday, European Commission President Ursula von der Leyen said that the European Union (EU) has launched 'swift and proportionate countermeasures' on US imports in response to steel tariffs. Similarly, UK Trade Minister Jonathan Reynolds said that it is disappointing that the US has decided to go ahead with global tariffs on steel and aluminum, adding that they will keep all options on the table and won't hesitate to respond in the national interest. Meanwhile, Australia's Prime Minister Anthony Albanese noted that they will not impose reciprocal tariffs on the US, explaining that retaliatory measures would only increase costs for Australian consumers and fuel inflation.

The US Dollar (USD) came under selling pressure in the early American session on Tuesday and the USD Index dropped to its weakest level since mid-October near 103.20. Early Wednesday, the USD Index stages a rebound and trades in positive territory above 103.50. US stock index futures also cling to modest gains in the European morning after Wall Street's main indexes registered losses on Tuesday.

After fluctuating wildly in the second half of the day, USD/CAD closed virtually unchanged on Tuesday. The pair edges higher on Wednesday and trades above 1.4450. The BoC is widely expected to lower the policy rate by 25 basis points to 2.75% after the March meeting.

EUR/USD gathered bullish momentum and climbed to its highest level in five months near 1.0950 on Tuesday. The pair corrects lower on Wednesday and trades below 1.0900 in the European morning.

GBP/USD gained more than 0.5% on Tuesday and rose above 1.2950. Pressured by the USD recovery early Wednesday, the pair retreats toward 1.2900.

USD/JPY holds its ground and rises toward 148.50 after posting modest gains on Tuesday. Bank of Japan Governor Kazuo Ueda said on Wednesday that it is natural for long-term rates to shift in line with the market view on the outlook for short-term policy rates. 

Following Monday's decline, Gold rebounded on Tuesday and gained nearly 1% on the day. XAU/USD struggles to preserve its bullish momentum but manages to hold above $2,900 on Wednesday.