07:29 AM EDT, 08/01/2025 (MT Newswires) -- New 'reciprocal' tariffs from the United States announced on Thursday are having little market impact, said ING.

Canada deserves special attention in the bank's view, though, especially after Mexico secured another pause extension on Thursday.

Despite partial USMCA protection from the new 35% levy, ING thinks markets continue to underestimate the downside risks for the Canadian economy. Expectations remain that the U.S. and Canada will reach a deal, but progress on negotiations has been lacklustre so far and Canada's possible recognition of Palestine as a state created another stumbling block.

Earlier this week, the Bank of Canada seemed to leave the door very much open to additional rate cuts if activity and/or the jobs market deteriorates. ING sees risks on both of these fronts, and 15bps pricing by year-end continues to appear overly conservative.

The bank expects at least one BoC rate cut by year-end in Canada, and targets 1.40 in USD/CAD near term.