ING’s call sets up a bearish CAD view even after a period of relative currency resilience, arguing that markets are still applying a 2025 style playbook that assumes escalation gives way to negotiation and fades the initial FX reaction.
That framework has kept CAD’s underperformance against G10 peers contained to around half a percentage point once the broader dollar move is stripped out, and has kept hedging costs muted relative to when the trade dispute first flared in December 2024
ING’s view diverges from that complacency, pointing to dovish Bank of Canada repricing and a rising tariff risk premium as reasons CAD should underperform peers such as AUD and NOK by a meaningful margin. The near term path for USD/CAD still points higher toward 1.3920-1.3950, though ING’s bearish dollar view, built on expectations for Fed cuts by year end, is expected to cap those gains into the fourth quarter. ING thinks markets are underpricing the damage from the Canada tariff dispute and expects the loonie to keep losing ground against its G10 peers.
Summary: ING expects CAD to underperform most G10 peers in the coming months, citing dovish Bank of Canada repricing and a rising tariff risk premium USD/CAD has scope to move higher near term toward 1.3920-1.3950, but ING sees gains later capped by an expected dovish Fed Firm forecasts USD/CAD at 1.39 by the end of the third quarter and 1.38 by the end of the fourth 50% US tariffs on roughly $20bn of Canadian goods took effect after talks collapsed on 22 August, with 50% tariffs on Canadian autos, auto parts and steel due from 1 January 2027 Canada has unveiled matching dollar-for-dollar retaliatory tariffs worth $20bn, including 50% levies on steel and aluminium, set to take effect on 8 September Markets have pared Bank of Canada hike pricing to 44bp cumulative by April 2027, down from 63bp at the start of the week; ING pencils in one hike in Q2 2027 and another in Q4 2027 ING says CAD’s muted reaction so far reflects markets