CIBC Capital Markets expects USD/CAD to stay elevated near-term as the Federal Reserve keeps tightening while the Bank of Canada holds rates steady. The bank sees the pair easing only in 2027, tied to a possible US-Canada trade deal.
CIBC Capital Markets expects USD/CAD to average 1.42 in Q4 2026, as the Federal Reserve continues tightening while the Bank of Canada holds rates steady.
The bank does not expect the BoC to follow the market's pricing for a rate hike this year. Higher oil prices could lift Canadian headline inflation, but CIBC expects that effect to be offset by economic slack created by trade tensions with the United States. It forecasts Canada's unemployment rate rising to 6.6% in Q4 2026.
The outlook improves in 2027, according to CIBC. The bank expects negotiations with the United States to lead to a rollback of Section 338 tariffs and a broader trade agreement, which could support Canadian economic growth and let the BoC raise rates early next year. It forecasts USD/CAD at 1.37 by mid-2027.
CIBC's broader FX forecast has USD/CAD at 1.42 in Q4 2026, falling to 1.39 in Q1 2027 and 1.35 by Q4 2027.
Source: Investing.com
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