Loonie Rally Pauses Before Fresh Gains Amid Trade Uncertainty

The Canadian dollar has seen a strong rally in Q3, driven by positive data and higher oil and gold prices. According to Marion and Dahms from National Bank of Canada (NBC), USD/CAD briefly dipped below 1.38 in August before rebounding. They attribute this move to the loonie's appreciation, which is now at roughly a 2.5% gain against the US dollar for the quarter.

The pair has been affected by new U.S. tariffs and trade uncertainty, which raises downside risks to Canadian growth. However, the authors expect a near-term USD/CAD rebound toward 1.40 before a renewed move lower toward 1.33 by 2027.