Desjardins Downplays Canadian Dollar Gains Amid Ongoing Trade Uncertainty

Desjardins, a Canadian bank, is forecasting limited gains for Canada's dollar this year due to ongoing trade uncertainty.

In a research note, economists Jimmy Jean and Tiago Figueiredo expect the US-Canadian dollar exchange rate (USD-CAD) to hover around 1.42 in the current quarter before easing slightly to about 1.40 by the end of the year.

While avoiding a breakdown in the USMCA (CUSMA) trade pact would remove a tail risk for the Canadian dollar, it wouldn't restore predictability for businesses, according to Desjardins.

The more significant move, they argue, will come later. As trade uncertainty fades and the Canada-US interest-rate gap narrows, they see the Canadian dollar firming in 2027, taking USD-CAD to 1.38 in the first three months of that year and 1.37 in the second quarter.