TD Securities is projecting a gradual strengthening of the Canadian Dollar against the US Dollar through 2026, based on a structurally bearish outlook for the greenback. The strategists cite three key drivers supporting their medium-term USD/CAD downtrend: anticipated Federal Reserve easing that won’t materialize until 2027, a significantly high threshold for additional Bank of Canada rate cuts, and improving terms of trade for Canada that should bolster the loonie’s fundamentals.
This forecast suggests a departure from recent USD strength patterns and positions the Canadian Dollar for sustained gains over the next two years. The timing is particularly relevant as markets continue pricing in central bank policy trajectories amid shifting economic conditions. Traders holding long USD/CAD positions may need to reassess their exposure, while Canadian exporters could face headwinds from a stronger domestic currency.
FXnCO Insight
Currency traders should monitor BoC rate decision thresholds closely, as fewer-than-expected cuts would accelerate CAD appreciation and create opportunities in cross-currency pairs involving the loonie.
Source: FXStreet