𝐖𝐞𝐞𝐤 𝐀𝐡𝐞𝐚𝐝 – 𝐔𝐒 𝐂𝐏𝐈 𝐒𝐞𝐭 𝐭𝐨 𝐄𝐚𝐬𝐞, 𝐁𝐨𝐂 𝐭𝐨 𝐏𝐫𝐨𝐛𝐚𝐛𝐥𝐲 𝐂𝐮𝐭 𝐀𝐠𝐚𝐢𝐧

𝐔𝐒 𝐂𝐏𝐈:
With President Trump’s tariff policies constantly changing, investors are struggling to keep up. But on Wednesday, the U.S. inflation report (CPI) for February could offer a welcome distraction. The data might also show that inflation is starting to decline, similar to what was seen in January’s PCE report.

𝐓𝐚𝐫𝐢𝐟𝐟𝐬
Trump’s decision to go ahead with levies as high as 25% against Canada and Mexico and raise them by 20% for China, not to forget the sectoral and reciprocal tariffs that have yet to be finalized, could derail the Fed’s battle to steer inflation all the way down to 2.0%.

𝐂𝐏𝐈 𝐅𝐞𝐛𝐫𝐮𝐚𝐫𝐲 𝐅𝐨𝐫𝐞𝐜𝐚𝐬𝐭
In January, inflation (CPI) hit its highest level since June 2024, reaching 3.0% year-over-year, while core CPI also rose to 3.3%. However, February’s data is expected to ease concerns about rising inflation. Forecasts suggest headline CPI will drop slightly to 2.9%, and core CPI will fall to 3.1%

𝐁𝐎𝐂 𝐈𝐧𝐭𝐞𝐫𝐞𝐬𝐭 𝐑𝐚𝐭𝐞𝐬:
The Bank of Canada will decide on interest rates this Wednesday (12 March), drawing attention to the country amid its trade tensions with the U.S. Unlike Mexico’s leader, Canada’s Prime Minister Justin Trudeau has openly responded by imposing tariffs on U.S. imports, Canada’s largest trading partner.
This trade conflict is expected to hurt Canada’s economy and could raise prices on C$125 billion worth of U.S. goods.
However, it might not go that far—Trump recently signed orders delaying 25% tariffs on nearly 40% of Canadian imports until April 2. In response, Trudeau has paused his latest counter-tariffs.

𝐋𝐚𝐬𝐭 𝐘𝐞𝐚𝐫 𝐑𝐚𝐭𝐞𝐬 𝐂𝐮𝐭𝐭𝐬

For the Bank of Canada, this creates a tough decision. After cutting interest rates aggressively last year, Canada’s economy is recovering, with strong job growth but mixed consumer spending. More importantly, inflation seems to be stabilizing, which will influence the Bank’s next move.
After cutting interest rates by 200 basis points, the Bank of Canada (BoC) is likely to hold off for now. However, concerns about the impact of Trump’s tariffs on economic growth could push policymakers to cut rates again in March.

𝐁𝐎𝐂 𝐈𝐧𝐭𝐞𝐫𝐞𝐬𝐭 𝐝𝐞𝐜𝐢𝐬𝐢𝐨𝐧 𝐟𝐨𝐫𝐞𝐜𝐚𝐬𝐭
Investors believe there’s a 66% chance of a 0.25% rate cut. This decision could cause a strong reaction in the Canadian dollar. Interestingly, even if the BoC lowers rates, the loonie could still strengthen against the U.S. dollar if the Bank signals it plans to pause further cuts.
That said, any new tariff announcements from Trump in the coming days could shift the focus away from the BoC, keeping currency traders on edge.