The Canadian dollar recouped much of its earlier decline against the greenback on Tuesday as investors assessed the chances of U.S. President Donald Trump carrying out a threat to impose a hefty tax on imports from Canada next month.

Cooling headline inflation figures will be more than enough to push the Bank of Canada (BoC) into a fresh batch of rate cuts; interest rate futures traders are now pricing in 83% odds of a 25 bps rate trim from the BoC next week, up slightly from the previous 78%.

The Canadian dollar won a slight reprieve on Monday after Donald Trump did not immediately impose tariffs on imports from Canada on his first day in office. The loonie was up 1.25 per cent to 69.86 cents U.

The Canadian dollar weakened against its U.S. counterpart on Friday, with the currency approaching a multi-year low it hit in December as the looming U.S. presidential inauguration focused attention on expected trade tariffs.

Trump was quoted saying his team was thinking of tariffs around 25% which could be announced on Feb. 1 but offered no other specifics.

Canada’s dollar is heading for a wild week as US President-elect Donald Trump assumes office and traders prepare for the US to impose tariffs on the country’s exports.

The U.S. dollar rose on Tuesday, recovering from its biggest daily percentage drop in 14 months after President Donald Trump suggested the U.S. could impose tariffs on Canada and Mexico by Feb. 1, countering expectations he might take a gradual approach.