07:18 AM EST, 02/28/2025 (MT Newswires) -- USD/CAD rallied Thursday as United States President Donald Trump outlined a tariff schedule that explicitly includes duties on Canada and Mexico from next Tuesday, said ING.

The pair is currently embedding around 2% of risk premium, according to the bank's short-term fair value model. That is above the 1.5 standard deviation, but still well below the nearly 4% peak risk premium that was embedded in USD/CAD on Feb. 3.

Back then, ING published a note to discuss its view on the Canadian dollar (CAD or loonie) under the assumption that 25% tariffs would go ahead. Most of those considerations stand, and depending on how long tariffs remain in place, a move to 1.50 is a definite possibility, stated the bank.

The difference this time is that markets are treating Trump's tariff threat with more skepticism, refusing to price in the full tariff effect and partly betting on another last-minute deal, pointed out ING.

The bank still sees upside risks to USD/CAD on Friday unless there are any reports of a de-escalation. ING sees 1.45 as the level that would mark a shift to markets pricing in the tariff risk as a base case.

If duties are levied on Tuesday, then ING will look at 1.480 as the key resistance to be tested.