Canadian dollar outlook weakens as USMCA uncertainty dims rate hike expectations
The outlook for the Canadian dollar has softened as economists revise expectations for currency strength amid growing uncertainty over the future of the U.S.-Mexico-Canada Agreement (USMCA) and its potential impact on monetary policy in Canada.
A Reuters poll of foreign exchange analysts indicates that the Canadian dollar is now expected to appreciate more modestly than previously forecast over the next year, reflecting weaker assumptions about economic momentum and interest rate increases.
Slower gains expected for the loonie
The median forecast from 39 foreign exchange analysts predicts the Canadian dollar will strengthen to around 1.40 per U.S. dollar over the next three months, equivalent to approximately 71.43 U.S. cents.
This represents a downgrade from last month’s projection of 1.37 per U.S. dollar, signaling a less optimistic outlook for Canada’s currency performance in the near term.
Trade uncertainty weighs on economic outlook
Analysts point to uncertainty surrounding renegotiations of the USMCA trade agreement as a key factor influencing expectations.
Concerns over potential disruptions to trade flows between Canada, the United States, and Mexico are seen as a drag on business confidence and export growth.
This uncertainty is also affecting expectations for the Bank of Canada, with fewer analysts anticipating near-term interest rate hikes.
Rate expectations revised lower
Weaker economic projections linked to trade uncertainty are reducing the likelihood of tighter monetary policy from Canada’s central bank.
With inflation pressures easing and growth expectations more subdued, markets are increasingly pricing in a more cautious stance from policymakers.
Broader currency market implications
The revised outlook reflects broader sensitivity in foreign exchange markets to geopolitical and trade-related developments.
For Canada, the combination of external trade risks and shifting interest rate expectations continues to shape sentiment toward the loonie.
-
15:45
-
15:30
-
15:15
-
15:08
-
15:00
-
14:50
-
14:42
-
14:35
-
14:25
-
14:10
-
14:06
-
13:47
-
13:30
-
13:15
-
13:00
-
12:45
-
12:40
-
12:30
-
12:15
-
12:00
-
11:42
-
11:40
-
11:25
-
11:11
-
10:47
-
10:32
-
10:21
-
10:15
-
10:00
-
09:45
-
09:30
-
09:15
-
09:02
-
09:00
-
08:45
-
08:30
-
08:15
-
23:00
-
22:30
-
22:00
-
21:00
-
20:30
-
20:00
-
19:00
-
18:55
-
18:40
-
18:25
-
18:10
-
17:55
-
17:40
-
17:25
-
17:10
-
16:55
-
16:40
-
16:25
-
16:10
