USD/CAD flat lines near 1.3950, BoC rate decision in the spotlight

• USD/CAD trades flat around 1.3955 in Wednesday's early Asian session. 
• The BoC is expected to hold interest rates steady on Wednesday. 
• Trump said the auto industry could get exemptions from tariffs. 

The USD/CAD pair holds steady near 1.3955 during the early Asian session on Wednesday. The upside for the Canadian Dollar (CAD) might be limited amid the dovish expectations from the Bank of Canada (BoC). The BoC interest rate decision will take center stage later on Wednesday, with no change in rates expected. 

Cooler-than-expected Canadian inflation data supported bets for additional interest rate cuts by the BoC this year, which might drag the CAD lower against the Greenback. Data released by Statistics Canada on Tuesday showed that the country's Consumer Price Index (CPI) inflation eased to 2.3% in March from 2.6% in February. This figure came in softer than the estimation of 2.6%. On a monthly basis, the CPI rose 0.3% in March, compared to 1.1% prior and 0.7% expected. 

Investors saw a 57% chance that the BoC would pause its interest rate-cutting cycle at its April meeting on Wednesday but expected the BoC to resume easing in June and were pricing in two additional reductions in total by the end of 2025, according to a Reuters poll. The BoC's benchmark interest rate is currently at 2.75%.

US President Donald Trump on Monday said he was considering a modification to the 25% tariffs imposed on foreign auto and auto parts imports from Mexico, Canada and other nations. Trump's move to exempt crucial technology products from reciprocal tariffs and reports of a potential pause in his auto import levies eased concerns of imminent recession risks in the US. This, in turn, could provide some support to the US Dollar (USD) in the near term.