Tariffs continue to be the main driver of USD/CAD – Danske Bank

Today focus in CAD FX turns to the January inflation figures at 14:30 CET , Danske Bank's FX analyst Mohamad Al-Saraf reports.

USD/CAD to climb higher towards 1.45

"January is the only full month during which the temporary general sales tax break is in effect. While the effect was only partial in December, headline inflation was somewhat weaker than expected at 1.8% y/y (cons: 1.9%)."

"Hence, risks are tilted to the downside, though consensus expects a slight uptick in the headline figure to 1.9% y/y. The market reaction is likely to be muted, as tariffs continue to be the main driver of USD/CAD."

"Looking ahead, we continue to believe that tariffs will be the overarching trigger of any moves in the near-term - however on a 12M horizon, we project the cross to climb higher towards 1.45 amid our bullish outlook on the USD."