Canadian Dollar May Weaken Before Rebound in 2027: TD Securities

According to Jayati Bharadwaj, head of FX strategy at TD Securities, the Canadian dollar may weaken before rebounding in 2027. In a recent interview with BNN Bloomberg, she discussed her currency forecast and how it is influenced by the divergence between Canada and the U.S. economies.

Bharadwaj believes that October and December are too early for the Bank of Canada to raise interest rates due to a softer labour market, contained inflation, and trade uncertainty. She also notes that rising diesel prices could spread inflation through transportation, agriculture, and consumer goods, but Canadian data have yet to show this effect.

Furthermore, she expects further Federal Reserve rate hikes to keep the Canadian dollar under pressure near 70 U.S. cents. However, as the Bank of Canada begins raising rates in early 2027, the Canadian dollar could strengthen.

Bharadwaj downplays the risk associated with the Alberta referendum, stating that broader ties to Europe and Asia carry more weight in her currency assessment.