USD/CAD surged almost 1% as US tariff threat raised Bank of Canada (BOC) rate cut bets, BBH's FX analysts report.

Canada's business investment is expected to remain subdued

"Markets price-in over 50% odds of a 25bps BOC policy rate cut in March and a total of 60bps of easing over the next 12 months vs. 40bps earlier this week. We expect the BoC to pause easing at its next March 12 meeting in part because core inflation (average of trim and median CPI) is tracking above the BOC’s Q1 projection of 2.5%."

"Canada monthly and quarterly GDP data are due today. Statistics Canada advance information indicates that real GDP by industry increased 0.2% m/m after falling -0.2% in November. The January GDP estimate will be published at the same time."

"Over Q4, the Bank of Canada (BOC) projects real GDP by expenditure at 1.8% SAAR vs. 1.0% in Q3 driven by consumer spending, residential investment, and net exports. Business investment is expected to remain subdued while inventory destocking is forecast to be the main drag to growth in Q4."