The Canadian dollar rallied yesterday on the US announcement that USMCA-compliant products would be exempt from tariffs until 3 April, ING's FX analyst Chris Turner notes.

Downside risks for USD/CAD are limited

"Almost all US-Canada-Mexico trade falls under USMCA, even though not all exporters are compliant with the Agreement's rules. Markets had never priced in 25% tariffs as a long-lasting measure, and USD/CAD had already corrected from the highs before yesterday's move."

"Today, we'll watch Canadian jobs figures for February ahead of next week's Bank of Canada meeting. Consensus is for a 20k change in employment, and we think we'll need to see a very strong figure to cast doubts on a cut next week."

"We believe the downside risks for USD/CAD are limited given the prospect of Canada still being hit by reciprocal tariffs in April. A return to 1.44 in the coming weeks is entirely possible, but today's US payrolls can still add some pressure."