TD Securities strategists keep a structurally bearish view on the US Greenback (USD) and a medium-term bias towards decrease USD/CAD. They anticipate Fed easing in 2027, a excessive bar for additional Financial institution of Canada (BoC) cuts, and enhancing Canadian phrases of commerce to help 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, doubtlessly reigniting the “hedge USD” commerce. We anticipate Fed coverage to transition towards easing in 2027 after a chronic maintain in 2026, whereas the bar for additional BoC easing is excessive with coverage already beneath 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 2026.”
“Additional out, nonetheless, the long-term profile argues for decrease USD/CAD ranges by the top of 2026.”
“Taken collectively, we proceed to see the stability of dangers skewing towards a gradual erosion in residual USD help, in step with our forecast for USD/CAD to maneuver towards 1.34 by 2026.”
“Within the worst case state of affairs 3 above the place USMCA goes away, we anticipate significant CAD depreciation vs the USD and different G10 friends within the rapid aftermath. USD/CAD will seemingly 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 seemingly nonetheless obtain preferential therapy.”
(This text was created with the assistance of an Synthetic Intelligence instrument and reviewed by an editor.)
