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%.

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