The Bank of Canada is expected to maintain its data-dependent monetary policy stance despite ongoing uncertainty surrounding the United States-Mexico-Canada Agreement review, according to TD Securities. The Canadian bank’s analysis suggests trade-related risks face a high threshold before they would meaningfully shift the central bank’s current trajectory. TD Securities projects the Bank of Canada will hold rates steady until the first quarter of 2027, when the next hike is anticipated. This outlook comes as the Federal Reserve pivots toward a monetary easing cycle, creating a potential divergence between North American central bank policies. The assessment matters for Canadian dollar positioning and cross-border trade flows as markets navigate the USMCA renegotiation period. Traders should monitor how this extended pause impacts CAD volatility and interest rate differentials versus USD, particularly as the Fed loosens while Canada remains patient.
FXnCO Insight
Position for sustained CAD weakness against USD through 2026 as widening rate differentials favor the greenback while Canadian policy stays anchored.
Source: FXStreet