07:52 AM EST, 03/03/2025 (MT Newswires) -- The biggest market driver on Monday will be any updates on United States tariffs on Mexico and Canada, as 25% duties are due to come into effect on Tuesday, said ING.

Canadian and Mexican officials are attempting to strike another last-minute deal, and U.S. officials have also floated the idea of imposing smaller than 25% tariffs, wrote the bank in a note. One possibility is that -- alongside increased commitment to fighting illegal drug traffic -- President Donald Trump will require both countries to replicate U.S. tariffs on China, which may be hiked from 10% to 20%.

The Canadian dollar (CAD or loonie) and Mexican peso (MNX) depreciated at the back end of last week but are still not pricing 25% tariffs as the baseline, stated ING. The foreign exchange market saw Mexico as more likely to avert tariffs over Canada a month ago and appears to have a similar feeling now, having penalised the loonie more than the peso in the past week.

Monday's events will be inevitably binary for foreign exchange, but given that markets are still leaning toward another delay in tariffs, there are more downside risks than upside risks for CAD and MXN on Monday, added the bank. USD/CAD and USD/MXN are currently trading 2.5% and 3.5% off their Feb. 3 highs.

ING will be looking for moves above 1.460 and 21.0 as key indicators of a pessimistic shift in sentiment on Monday. The bank's base case remains that 25% tariffs will be averted, although ING admits it remains a very close call.