The Bank of Canada (BoC) is widely expected to cut rates by 25bp today. That is also our call and markets are fully pricing it in. The focus will therefore be on forward-looking indications from Governor Tiff Macklem, and on that we think the risks are skewed to the dovish side, ING's FX analyst Francesco Pesole notes.

USD/CAD has a chance to move above 1.45

"The market is pricing in a total of 70bp by year-end but embedding a pause at the March meeting. Given the tangible risk of US tariffs on Canada, whether ad-hoc or part of universal protectionism, we think the BoC will err on the dovish side and fail to signal it is close to reaching the terminal rate."

"This means there are mostly downside risks for CAD today. Importantly, any indications from the BoC that US tariff risk can feed into a more dovish stance would further increase CAD’s sensitivity to protectionism. That’s because markets will feel more flexible to price in BoC cuts in a tariff scenario. We continue to see risks above 1.45 in USD/CAD."