Will a Surprise BoC Rate Cut Push USD/CAD Past 1.40?

Today markets are split 50/50 on the BOC rate decision, but we might se a 25 bps cut after the higher March CPI and trade headwinds, which could send USD/CAD surging higher.

USD/CAD Regains Momentum Amid Rate Cut Speculation

The USD/CAD currency pair has been showing renewed strength following a volatile first quarter. After peaking at 1.4792 in early February—the highest level since 2000—on the back of President Trump’s announcement of a 25% tariff on Canadian and Mexican imports, the pair sharply reversed. Optimism surrounding trade negotiations, along with delays in key duties such as auto tariffs, shifted sentiment and pulled USD/CAD nearly ten cents lower to 1.3827.

In recent weeks, however, the tide has shifted once again. After a period of consolidation, USD/CAD is back on the rise, driven by softer Canadian inflation data and growing speculation over a possible rate cut by the Bank of Canada (BoC). The pair bounced strongly from its 200-day simple moving average after forming a doji candlestick pattern on Monday—a classic signal of indecision that often precedes a breakout.

Inflation Surprise Fuels BoC Cut Bets

Markets had largely been pricing in a rate hold heading into this week, with expectations split around 60/40 in favor of no change. However, when Canada’s March inflation data came in unexpectedly weak, sentiment shifted swiftly. Rate cut odds moved to an even 50/50 split, prompting a sharp 130-pip surge in USD/CAD. The move underscores just how sensitive the pair remains to macroeconomic data and central bank guidance.

The inflation report added pressure on the BoC to act, particularly as Canada’s housing market continues to cool. Elevated rates—introduced to tame post-pandemic price increases—have weighed heavily on affordability. According to mortgage broker Ron Butler, demand in the housing sector is now largely driven by high-income buyers, with average-income households increasingly priced out. This dynamic strengthens the case for easing, even if inflation is still above the BoC’s comfort zone.

Technically, the pair has reclaimed upward momentum, but the path toward 1.40 remains closely tied to the BoC’s next move. A surprise rate cut today could deliver the catalyst needed to clear that psychological threshold. Conversely, a decision to hold may slow or even reverse the recent gains, especially if paired with hawkish commentary.

In either case, USD/CAD is entering a critical phase. Between policy expectations, evolving trade dynamics, and political shifts ahead of the Canadian general elections, the coming weeks may prove pivotal for the currency pair. Traders and investors will be watching closely to see whether this renewed rally has the strength to push through the next major level.

USD/CAD Live Chart

USD/CAD

Skerdian Meta

Lead Analyst

Skerdian Meta Lead Analyst.
Skerdian is a professional Forex trader and a market analyst. He has been actively engaged in market analysis for the past 11 years. Before becoming our head analyst, Skerdian served as a trader and market analyst in Saxo Bank’s local branch, Aksioner. Skerdian specialized in experimenting with developing models and hands-on trading. Skerdian has a masters degree in finance and investment.