Canadian Dollar Could Hit 78 Cents U.S. Sooner Than Expected, Says Scotiabank Analyst

Scotiabank’s chief FX strategist, Shaun Osborne, predicts that the Canadian dollar could rise to 78 cents U.S. against the greenback by the end of this year instead of 2026 due to a deteriorating outlook for the loonie’s American counterpart. The Canadian dollar has clocked a strong run over the last six months, up 6.2% against the U.S. dollar. The U.S. dollar index, which measures the greenback’s performance against a basket of other major currencies, including the Canadian dollar, has fallen nearly 11% in its worst performance over six straight months since the 1970s and its worst first-half showing since 2017.

Osborne forecasts that persistent deficits in the U.S. are likely due to the policies and actions of President Donald Trump, including his massive tax-cut bill, which is projected to increase U.S. debt by $3.3 trillion. The bill passed its final legislative test and was signed into law by Trump by his July 4 deadline.

The potential erosion of Fed independence is another worry for investors at a time when inflationary pressures still seem to be simmering. Trump’s comments on Federal Reserve Chair Jerome Powell’s resignation may lead to further decline in the U.S. dollar. 

Global investors have become over-indexed to U.S. dollar assets, and a TD Securities report suggests that if Canadian pension funds decide to repatriate U.S. investments to hedge against greenback losses, that flow of money back into Canada could provide a significant lift.

TD Securities is currently calling for the Canadian dollar to rise 76 cents U.S. by December.

Source: Financial Post

Canadian Dollar’s Rise To Be Tamed by Rate Cuts, Says Top Forecaster

Canada’s dollar is expected to strengthen against the US dollar this year, but its rise will be limited by the central bank’s interest-rate cuts. Royce Mendes, managing director and head of macro strategy at Desjardins Securities, expects the Bank of Canada to cut rates multiple times this year, while markets are pricing in less than one reduction. As a result, he sees the loonie trading at 1.35 per US dollar by year-end. 

Mendes believes that a tariff-induced inflation flare-up has passed and the central bank will lower rates to aid the economy. He believes there is limited room for further strength this year, as the market has moved too far in terms of pricing out the chance that the Bank of Canada returns to rate cuts this fall or winter. The loonie has recovered since being hit by President Donald Trump’s tariffs earlier this year but is still lagging the cohort year-to-date.

Source: Financial Post