The Loonie came under some pressure overnight after Trump announced he’s ending all trade negotiations as retaliation for an Ontario-sponsored anti-tariff ad, ING's FX analyst Francesco Pesole notes.

USD/CAD faces upside risks in the near term

"Some might be surprised by the relatively small (0.2%) jump in USD/CAD on the news, but in reality there had been little to no progress on US-Canada trade talks so far, and the pair was already trading at over 2% short-term overvaluation (in our short-term fair value estimate) before Trump’s post."

"But if anything, we think that this development slightly increases the chance of another Bank of Canada rate cut next week. We expect a 25bp reduction, broadly in line with consensus and market pricing (18bp), as trade uncertainty and existing US tariffs are weighing heavily on Canadian businesses’ investment and hiring plans. The worrisome picture for activity and jobs should, in our view, prevail over hotter-than-expected September inflation numbers and convince the BoC to cut again."

"We also think it’ll be hard for the BoC to close the door on more easing already, which should keep the Canadian dollar weak in the crosses. USD/CAD faces upside risks in the near term, where explorations above 1.410 remain very much possible. But by year-end, we still think USD weakness can drag the pair back towards 1.38."