- EUR/CAD gives up most intraday gains and falls below 1.0500.
- Trump mentioned that he plans to announce 25% tariffs on Canada and Mexico.
- The ECB is expected to cut its deposit facility rate gradually at each of its next four monetary policy meetings.
The EUR/CAD pair gives up most of its intraday gains after failing to extend its four-day streak above the key 1.5050 resistance in the European session on Tuesday. However, the asset’s outlook remains firm as the Canadian economy is expected to face steep tariff increases from the United States (US).
US President Donald Trump indicated at his inauguration ceremony on Monday that he plans to impose 25% tariff increases on Canada and Mexico on February 1. This scenario will result in significant weakness in Canadian exports. Furthermore, Trump’s plans to increase strategic oil reserves negatively affected Canada’s export sector, being a major oil exporter to the US.
Meanwhile, investors await Canadian Consumer Price Index (CPI) data for December, due at 13:30 GMT. The CPI report is expected to show that inflation rose steadily by 1.9% year-on-year. On a monthly basis, price pressures are estimated to have eased 0.4% after remaining stable in November.
Soft US inflation data and uncertainty over Trump’s tariff plan would raise expectations that the Bank of Canada (BoC) will continue to reduce interest rates at a faster-than-usual pace of 50 basis points (bps). . Meanwhile, the Reuters poll for the period January 10-16 showed that the BoC is almost certain to cut interest rates by 25 basis points (bps) to 3%.
Across the Atlantic, the Euro (EUR) is also expected to face pressure from Trump’s tariff agenda, as he mentioned on Monday that he would remedy the trade imbalance with Europe by either “raising tariffs or forcing them to buy more oil and gas.” of the USA”. Trump’s tariff increases to the euro zone would weigh on an already weak economic outlook, so traders expect the European Central Bank (ECB) to cut interest rates gradually over the next four policy meetings.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
