Fed Aggression Boosts USD Against CAD and MXN

The outlook for North America's major currencies is shifting as the final stretch of 2026 approaches. A more aggressive monetary policy stance by the Federal Reserve, particularly in the United States, could significantly reshape the region's strength dynamics.

This backdrop, combined with potential trade tensions across North America, may become one of the most important drivers of currency performance in the months ahead. Both the Canadian dollar and the Mexican peso are facing difficulties in consistently recovering against a U.S. dollar that has regained strength after recent shifts in expectations surrounding the Federal Reserve.

In Canada, inflation eased to 3% from 3.2% in May, but still remains above the 2% target. In Mexico, inflation slowed to 3.26% in August, showing clear signs of disinflation across North America. In contrast, inflation in the United States remains near 3.4%, well above the Federal Reserve's 2% objective.

The differences among North America's central banks could become one of the most important drivers of currency performance through the final months of 2026. While the Federal Reserve is moving toward a more restrictive stance supported by inflation that continues to show resilience, both Banxico and the Bank of Canada are maintaining more cautious approaches.