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• USD/CAD trades with a mild positive bias near 1.4370 in Tuesday's early Asian session. 
• The BoC will go ahead with another cut to its benchmark interest rate on Wednesday. 
• Fears of a trade war with the US weigh on the Loonie. 

The USD/CAD pair trades with mild gains around 1.4380 during the early Asian session on Tuesday. Traders continue to digest the narrative of further tariff policies from the US President Donald Trump administration. All eyes will be on the Bank of Canada (BoC) and the US Federal Reserve (Fed) interest rate decision on Wednesday. 

The interest rate differential between Canada and the United States (US) could exert some selling pressure on the Canadian Dollar (CAD). The Canadian central bank has cut its policy rate a total of 1.75 percentage points in five consecutive decisions, cutting by 50 basis points (bps) in October and December amid signs of weakness in the economy and growing fears that inflation could drop too far below the 2% target. The BoC is likely to deliver a 25-bps rate cut in its benchmark interest rate on Wednesday, while the Fed is expected to hold its rates steady on the same day. 

Additionally, Trump threatened to impose a 25% tariff on all goods imported from Canada from February 1. This, in turn, contributes to the Loonie’s downside due to its heavy dependence on US trade. "A lot of what has been driving the loonie lately has been the noise out of the White House," said Étienne Bordeleau-Labrecque, Portfolio Manager at Ninepoint Partners.

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