Canadian Dollar Expected to Weaken Short-Term Amid Trade Tensions

Analysts expect Canada's dollar to weaken in the short term due to ongoing trade tensions with the US. According to a Reuters poll, the Canadian dollar is forecast to edge 0.4% lower to $1.39 per USD, or 71.94 cents, in three months. However, if a resolution is reached in the trade conflict, the currency is expected to strengthen by 1.8% to $1.36 in 12 months.

Nick Rees, head of macro research at Monex Europe, believes that many factors currently weighing against the Canadian dollar will fade once trade tensions are resolved. 'Trade tensions with the U.S. should eventually be resolved with a deal, regardless of present posturing, allowing domestic macro data to recover,' he said.

Other analysts also expect a moderate strengthening of the Canadian currency in 2027. Mirza Baig, a foreign exchange strategist at Desjardins, predicts that the gap between US and Canadian interest rates will narrow, leading to investment spending acceleration.