06:11 AM EST, 01/29/2025 (MT Newswires) -- The Bank of Canada is widely expected to cut rates by 25bp on Wednesday at 9:45 a.m. ET, said ING.

That is also the bank's call and financial markets are fully pricing it in.

As a consequence, the focus will be on forward-looking indications from Governor Tiff Macklem, and on that ING thinks the risks are skewed to the dovish side.

Markets are pricing in a total of 70bps reductions by year-end but embedding a pause at the March meeting, stated the bank. Given the tangible risk of United States tariffs on Canada, whether ad-hoc or part of universal protectionism, ING believes 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 the Canadian dollar (CAD or loonie) on Wednesday, according to the bank. Importantly, any indications from the BoC that U.S. 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. The bank continues to see risks above 1.45 in USD/CAD.