CAD Set to Benefit from Pending Trade Agreement with US
The Canadian Dollar (CAD) is expected to maintain its strength against the US Dollar (USD) in the near term, according to National Bank of Canada's latest tactical outlook. The bank projects a five-day trading range of 1.3700-1.3850 for the USD/CAD exchange rate.
The Canadian economy has received a boost from a tentative trade agreement between Canada and the US, which would halve steel and aluminium tariffs to 25% and reduce auto tariffs by ten percentage points to 15%. TD Economics notes that negotiations are still under way, but the pending agreement has already caught a bid for the CAD.
However, TD also finds support in Canadian data, with real retail volumes rising 1.5% in June, their strongest monthly gain since March 2025. The bank expects the Bank of Canada to remain patient and make no policy change at its 2 September meeting, citing contained underlying inflation as a tempering factor.
The risks to this outlook are material, with the deal not yet finalized, future CUSMA negotiations remaining unresolved, and StatCan's preliminary estimate pointing to a notable July retail pullback. Oil volatility could also reshape the Canadian Dollar outlook quickly.