08:25 AM EST, 01/31/2025 (MT Newswires) -- USDCAD still trades in close to its recent 1.46 highs, noted UBS.

This week's Bank of Canada rate cut was widely

expected and didn't move markets "significantly," said UBS.

Indeed, the Canadian economy has been hurting for some time and unemployment is above pre-COVID levels, warranting further easing, wrote the bank in a note to clients.

After this one, UBS expects one more cut to a terminal rate of 2.75% in the next policy meeting.

More importantly, however, the trade standoff with the United States has taken center stage, pointed out the bank.

UBS doesn't think the tariff deadline of this Saturday imposed by U.S. President Donald Trump will result in any action. Nevertheless, the risks of tariffs further down the line put significant downside pressure on the Canadian dollar (CAD or loonie) outlook.

For the time being, the bank prefers to remain on the sidelines in USDCAD and watch Trump's rhetoric carefully over the coming weekend.