TD Securities strategists keep a structurally bearish view on the US Greenback (USD) and a medium-term bias towards decrease USD/CAD. They count on Fed easing in 2027, a excessive bar for additional Financial institution of Canada (BoC) cuts, and enhancing Canadian phrases of commerce to assist CAD. Their baseline sees USD/CAD drifting towards 1.34 by late 2026.
Medium-term bias favors stronger CAD
“Medium-term bias stays towards decrease USDCAD. We keep a structurally bearish view on the USD, significantly as its current premium ought to fade alongside easing geopolitical dangers, probably reigniting the “hedge USD” commerce. We count on Fed coverage to transition towards easing in 2027 after a protracted maintain in 2026, whereas the bar for additional BoC easing is excessive with coverage already under impartial.”
“Furthermore, an enhancing Canadian outlook—supported by stronger phrases of commerce and the gradual pass-through of fiscal easing—ought to assist stabilize the home backdrop, reinforcing a transfer towards decrease USD/CAD ranges by way of 2026.”
“Additional out, nevertheless, the long-term profile argues for decrease USD/CAD ranges by the top of 2026.”
“Taken collectively, we proceed to see the steadiness of dangers skewing towards a gradual erosion in residual USD assist, in keeping with our forecast for USD/CAD to maneuver towards 1.34 by way of 2026.”
“Within the worst case state of affairs 3 above the place USMCA goes away, we count on significant CAD depreciation vs the USD and different G10 friends within the rapid aftermath. USD/CAD will doubtless breach and keep above 1.40 in that case. Nevertheless, any lasting CAD weak point (above 1.42) even in that state of affairs is unlikely because the vitality sector will doubtless nonetheless obtain preferential therapy.”
(This text was created with the assistance of an Synthetic Intelligence software and reviewed by an editor.)
