Canadian Dollar endured a roller-coaster session overnight, initially hitting turbulence after US President Donald Trump threatened to double tariffs on Canadian steel and aluminum imports to 50%. Markets were rattled by the surprise escalation, which was set to take effect within hours. However, the situation shifted after Ontario Premier Doug Ford agreed to suspend a surcharge on electricity exports to the US and scheduled a meeting with US Commerce Secretary Howard Lutnick. Following Trump’s indication that tariffs could be lowered after the talks, the Loonie managed to pare some of its earlier losses.

Despite this temporary relief, uncertainty surrounding tariffs is likely to weigh on business and consumer confidence on both sides of the border. Markets are now increasingly betting that BoC will need to extend its easing cycle to cushion against economic fallout. With a 25bps rate cut widely expected at today’s BoC meeting, traders are now pricing in at least two additional rate cuts by the end of the year. The central bank’s guidance will be critical in shaping expectations for further policy moves, particularly as growth concerns deepen amid trade war disruptions.

Another key event on traders’ radar today is US Consumer Price Index release. Though volatility could spike on the initial headline print, many market participants expect to “look through” the immediate reaction and return to the broader risk-off narrative. Recession worries, fueled by inconsistent trade policies and softer macro data, continue to overshadow the Dollars performance. This environment has generally weighed on the greenback in recent sessions, even though it managed a modest recovery from the steep selloff triggered by intensifying tariff drama.

Technically, EUR/USD appears to be taking a breather after hitting 161.8% projection of 1.0176 to 1.0531 from 1.0358 at 1.0932. But further rally is expected aslong as 1.0804 support holds. Firm break of 1.0932 could prompt upside reacceleration to 200% projection at 1.1287, which is slightly above 1.1274 key resistance. Nevertheless, break of 1.0804 will bring consolidations first.

In terms of weekly performance so far, Euro remains the best-performing currency. The British Pound follows closely behind, while Dollar has managed to stabilize, recovering some of its recent losses. On the other end of the spectrum, Canadian Dollar is currently the weakest performer, reflecting ongoing trade concerns and expectations of deeper BoC rate cuts. Swiss Franc and Australian Dollar are also lagging, while New Zealand dollar and Japanese Yen are positioned in the middle of the pack.

In Asia, at the time of writing, Nikkei is up 0.35%. Hong Kong HSI is down -0.35%. China Shanghai SSE is up 0.10%. Singapore Strait TImes is up 0.46%. Japan 10-year JGB yield is up 0.025 at 1.531. Overnight, DOW fell -1.14%. S&P 500 fell -0.76%. NASDAQ fell -0.18%. 10-year yield rose 0.075 to 4.288.

US CPI in focus as DOW vulnerable with double top breakdown

Market sentiment in the US remains fragile ahead of today’s CPI data for February, which is expected to be a major market-moving event. The challenge, however, lies in interpreting the impact of inflation data given the complex interplay between inflation trends, economic conditions, and Fed expectations. More importantly, the interaction is further complicated by the unpredictable shifts in US tariff policies. In the end, while traders may react initially to the numbers, they’re more likely to revert to pre-existing trends once the CPI risk is cleared.

Consensus forecast sees headline CPI dipping slightly from 3.0% to 2.9%, signaling that the uptrend from September’s low of 2.4% has finally ended. Meanwhile, core CPI is expected to ease marginally from 3.3% to 3.2%, but remains stuck in a narrow 3.2%-3.3% range since last June.

If the data confirms these expectations, it would reinforce the view that disinflation progress continued to stall. This, in turn, supports Fed’s cautious stance. Fed Chair Jerome Powell has repeatedly stressed that the central bank is in no rush to lower interest rates, and today’s inflation data is unlikely to change that narrative.

Fed fund futures are currently pricing in a 97% probability that Fed will hold rates at 4.25%-4.50% in its upcoming March 19 meeting, making it almost a certainty. However, the outlook for Q2 is much murkier. Traders are factoring in a 38% probability of a cut in May and an 85% chance of a reduction in June.

Beyond the near term, the real test will come in April when reciprocal tariffs are formalized. Given recent stock market volatility, where recession concerns have already led to deep selloffs, any additional economic stress from tariffs could further push Fed toward an aggressive easing cycle.

Some economists have already noted that the May or June rate cut could indeed start a series of swift reductions in the second half of the year, if confidence deteriorates further—especially if the labor market weakens significantly.

Technically, DOW should have completed a double top pattern (45073.63, 45054.36) after breaking through 41844.89 support. While deeper pull back is now in favor, strong support could be seen around 40k zone to contain downside, at least on first attempt.

The 40k zone represents 39889.05 resistance turned support, as well as 38.2% retracement of 32327.20 to 45054.36 at 40192.58. This development would keep price actions from 45054.36 as a correction to rise from 32327.20 only, likely a sideway pattern.

However, decisive break of 40k will argue that DOW is already in an even larger scale correction, or enter a bear market as some would describe.

BoJ’s Ueda acknowledges rising yields as market bets on policy shift

BoJ Governor Kazuo Ueda addressed the recent rise in bond yields, and noted, “I don’t see a big divergence between our view and that of markets”.

Speaking to parliament, Ueda emphasized the “biggest determinant” of long-term interest rates is market expectations regarding the central bank’s short-term policy rate.

He added, it is “natural for long-term rates to move in a way that reflects such market forecasts”. His comments come as Japan’s benchmark 10-year bond yield surged to a 16-year high of 1.575% on Monday.

Separately, Japan’s latest inflation data showed that annual wholesale inflation slowed slightly in February. Corporate goods price index , which tracks the prices businesses charge each other for goods and services, rose 4.0% yoy, in line with market expectations, down from January’s 4.2% yoy increase.

USD/CAD Daily Outlook

Daily Pivots: (S1) 1.4370; (P) 1.4445; (R1) 1.4511; More…

USD/CAD retreated ahead of 1.4541 and resistance and intraday bias is turned neutral first. Overall, price actions from 1.4791 high are seen as a corrective pattern, with rebound from 1.4150 as the second leg. On the upside, break of 1.4541 will target 100% projection of 1.4150 to 1.4541 from 1.4238 at 1.4629 and above. But for now, strong resistance is expected from 1.4791 to limit upside to bring the third leg. On the downside, break of 1.4238 will confirm that the third leg has started through 1.4150 support.

In the bigger picture, long term up trend is tentatively seen as resuming with prior breach of 1.4667/89 key resistance zone (2020/2015 highs). Next target is 100% projection of 1.2401 to 1.3976 from 1.3418 at 1.4993. This will remain the favored case as long as 1.3976 resistance turned support holds (2022 high), even in case of deep pullback.