07:21 AM EDT, 07/30/2025 (MT Newswires) -- The Canadian dollar (CAD or loonie) has dropped less than other G10 currencies during this round of US dollar (USD) appreciation, said ING.

For the moment, domestic factors aren't playing much of a role, and markets remain quite conservative on Bank of Canada rate cuts, pricing in only 15bps by year-end, stated ING.

As the BoC announces its policy decision at 9:45 a.m. ET Wednesday, the chances of a cut appear quite low, but the risks in the bank's view are tilted to the dovish side. The BoC Business Outlook shows limited pass-through from tariffs to Canadian consumers but signs of slower hiring, investment and consumer demand.

Then, there is the crucial point of the United States-Canada trade negotiations. From what has been reported, both Canadian and U.S. officials think progress has been lacklustre.

The market's baseline expectation is that trade deals will ultimately be agreed, the European Union experience -- and its spillover into EUR/USD -- suggests the conditions of those deals aren't secondary for the foreign exchange impact, it added.

Given how conservative BoC pricing is and economic/trade risks, ING expects Wednesday's BoC meeting to generate some dovish repricing and add pressure on CAD.

The bank continues to target 1.39 this quarter for USD/CAD.