CAD trades steadily on the day - Scotiabank

The Canadian Dollar (CAD) is moderately higher (with the MXN) as 25% steel/aluminum tariffs were enforced as of midnight. Yesterday's swings in spot reflected the ebb and flow of tariff headlines and there is unlikely to be any escape from that issue for some time. Thankfully, an off ramp was found amid yesterday's flurry of threats and counter-threats but ultimately, US manufacturers are still facing a significant jump in input costs from tariffs, Scotiabank's Chief FX Strategist Shaun Osborne notes.  

CAD steady ahead of BoC policy decision as steel tariffs land

"Canada is one of the primary sources of aluminum for the US. Bellicose trade talk will ensure that the Bank of Canada has to keep the door open to lower rates down the road. Assuming a 25bps cut at today's policy decision, taking the Target rate to 2.75%, markets are pricing in roughly 50bps of additional easing, putting the policy rate in the 2.25% area by late this year. A cut and a cautiously dovish bias today are largely priced in to markets at this point." 

"USD/CAD is likely to continue range trading between 1.4350/1.4550 for now. Price signals suggest some resiliency in the CAD despite all the recent volatility in the market. USD/CAD closed little changed on the day yesterday and the "doji" candle signal that formed on the daily chart suggests the USD's push into the low 1.45 area has stalled (close to where early March USD gains peaked)." 

"A look at the intraday chart supports the idea of a short-term USD peak at least, with the USD carving out a bearish outside range around yesterday's peak on the 6-hour chart. There should be firm resistance now at 1.4525/50 but there may also be a bias towards a modest pickup in the CAD towards support at 1.4400/05. A push below here targets 1.4350/75."