We expect a 25bp rate cut of the Bank of Canada overnight rate to 2.75% today. This would be a consensus move and markets are fully pricing it in. All the focus will be on the wording for future moves and, crucially, on hints of the BoC’s reaction function to US tariffs, ING's FX analyst Francesco Pesole notes. 

USD/CAD to move above 1.45 on the back of US protectionism

"The BoC already outlined a baseline scenario where US tariffs triggered an initially larger growth impact compared to the inflationary shock. That suggests a dovish BoC reaction and markets are pricing in 75bp of cuts in total (including today) for 2025."

"While Trump’s 50% metals tariff threat only lasted half a day, recent developments point in the direction of further escalation in the US-Canada trade spat and raises the probability that the BoC will err on the dovish side in its communication to prevent excessive negative repricing in growth expectations."

"We have been bullish on USD/CAD, and still favour a structural move above 1.45 on the back of US protectionism. The upcoming electoral campaign in Canada will focus on the tariff response, and indications of growing anti-US sentiment means both the Conservatives (which are leading in polls) and the Liberals (now led by Mark Carney) will retain a rather hawkish stance on trade."