A survey of 34 foreign exchange analysts conducted between July 31 and Tuesday indicates the Canadian dollar should remain largely unchanged in the near term before gaining modestly over the next year.
The poll's median projection places the Canadian dollar at 1.40 per U.S. dollar in three months - equivalent to 71.43 U.S. cents - a forecast unchanged from last month's survey. Over a 12-month horizon, respondents expect the currency to appreciate about 2.6% to trade at 1.366 to the U.S. dollar. That 12-month projection is slightly weaker than the previous forecast of 1.36.
Sarah Ying, head of foreign exchange strategy at CIBC Capital Markets, described the USD-CAD pair as likely to remain rangebound in the near term, reflecting the typical slowdown in trading activity during the summer months. Ying said several of the market drivers that had previously moved currency markets have lost momentum.
According to Ying, enthusiasm linked to artificial intelligence, market sensitivity to the Middle East conflict, and the effect of U.S. tariffs have all become less prominent as catalysts. She also noted the economic performance gap between Canada and the United States has begun to narrow, a factor that bears on currency valuations.
The Canadian economy expanded by 3.4% in the second quarter, a pace described in the poll as the country's strongest quarterly performance in more than three years. That Q2 growth figure forms part of the backdrop for analysts' assessments of the currency's path.
The poll results reflect a view that, absent renewed major catalysts, the Canadian dollar will not move sharply in the coming months but could show modest appreciation across a 12-month span. Market participants and observers will likely watch any re-emergence of the previously noted drivers or changes in comparative economic performance for signals that could alter this outlook.
Summary
The Canadian dollar is forecast to be stable over the next three months and to strengthen modestly over the following year, based on a poll of 34 foreign exchange analysts conducted between July 31 and Tuesday. Short-term expectations are unchanged from last month, while the one-year view calls for a 2.6% appreciation to 1.366 USD per CAD. Analysts say earlier market catalysts have waned and that Canada’s Q2 economy expanded 3.4%, its strongest quarterly showing in over three years.
Key points
- Short-term forecast: Median poll view of 1.40 USD-CAD in three months, unchanged from last month - impacts foreign exchange markets and currency traders.
- One-year outlook: Expected appreciation to 1.366, a 2.6% strengthening versus the U.S. dollar - relevant to exporters, importers and cross-border investment decisions.
- Macro backdrop: Canada reported 3.4% growth in Q2, its strongest quarterly expansion in more than three years, informing analysts' longer-term views.
Risks and uncertainties
- Diminished catalysts: If factors such as AI enthusiasm, market sensitivity to the Middle East conflict, or U.S. tariff effects were to re-intensify, the current rangebound expectation could change - this would affect currency markets and sectors exposed to FX moves.
- Comparative growth dynamics: Shifts in the economic performance gap between Canada and the United States could alter exchange rate expectations, influencing trade-sensitive sectors and capital flows.
Note: The poll reflects the views of the participating analysts during the stated polling period and provides a snapshot of expectations rather than a definitive forecast.