Canadian Dollar to Hold Steady Before Modest Gains Over Next Year, Poll Shows

The Canadian dollar is expected to remain stable against the greenback over the next three months before posting modest gains within a year, according to a recent poll of foreign exchange analysts. The forecast reflects a view that major market-moving catalysts have faded and that Canada's economic performance is improving relative to the United States.

Analyst Forecasts

A poll of 34 foreign exchange analysts conducted between July 31 and Tuesday showed a stable near-term outlook for the currency. The median forecast projects the Canadian dollar will trade at 1.40 per U.S. dollar (equivalent to 71.43 U.S. cents) in three months, matching the results from last month's survey.

Looking further ahead, analysts anticipate a gradual appreciation for the loonie:

• The 12-month forecast sees the currency strengthening by 2.6% to 1.366 per U.S. dollar.
• This is a slight revision from the previous 12-month forecast of 1.36.

Market Drivers and Context

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Market strategists point to a quieter trading environment and a narrowing economic gap between the two North American economies. "The USD-CAD pair is expected to remain rangebound as summer trading activity typically slows," said Sarah Ying, head of foreign exchange strategy at CIBC Capital Markets, in a comment provided to the survey.

Ying noted that several major catalysts that previously drove currency movements have diminished. These include enthusiasm around artificial intelligence, market sensitivity to the conflict in the Middle East, and concerns over U.S. tariffs.

Economic Backdrop

The forecast for a stronger Canadian dollar is supported by recent domestic economic data. Canada's economy expanded by 3.4% in the second quarter, its most robust quarterly performance in over three years. This strong growth helps to narrow the economic performance gap with the United States, providing a fundamental basis for potential currency appreciation over the long term.