The Canadian dollar weakened against the greenback on Wednesday as the Bank of Canada cut interest rates to support the economy ahead of expected U.S. trade tariffs, helping to widen the gap between Canadian and U.

The big difference with 2024 is the threat and impact of US tariffs. But the BoC’s chief noted that “Monetary policy cannot offset the economic consequences of a protracted trade conflict.” The challenge for the bank in that scenario though is the inflationary pressure of tariffs.

The Canadian Dollar lost 0.25% against the Greenback on Wednesday. The Bank of Canada cut interest rates by another 25 bps, to 3%. The BoC also announced the end of its quantitative tightening program.

The gap in interest rate policies between Canada and the U.S. widened further as the Bank of Canada cut its key lending rate by a quarter-point on Wednesday, while the U.S. Federal Reserve held rates steady.

The USD/CAD hit a six-day high of 1.4470 after the Bank of Canada (BoC) cut rates by 25 basis points from 3.25% to 3%, as economists widely expected. However, as market participants digest the BoC’s monetary policy statement, the pair has retraced toward 1.4430, yet it remains up 0.29%.