Canadian Dollar to Hold Steady in Short Term, Poll Shows Modest Gains Over Next Year

The Canadian dollar is expected to hold steady against its U.S. counterpart in the near term before posting modest gains over the next 12 months, according to a recent poll of 34 foreign exchange analysts.

The survey, conducted from July 31 to last Tuesday, suggests that major market catalysts that previously drove currency volatility have begun to fade.

Analyst Forecasts

The median forecast from the poll indicates that the Canadian dollar will trade near current levels for the next few months before strengthening.

• Three-month forecast: The currency is projected to hold at 1.40 per U.S. dollar (or 71.43 U.S. cents), a level consistent with the previous month's survey.
• Twelve-month forecast: Analysts expect the Canadian dollar to appreciate by approximately 2.6% to 1.366 per U.S. dollar. This is a slight revision from the previous 12-month forecast of 1.36.

Market Commentary

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Analysts attribute the expected short-term stability to seasonally quiet summer trading, which typically keeps the USD/CAD pair in a defined range. "The major catalysts that had been driving currency markets have receded," said Sarah Ying, Head of FX Strategy at CIBC Capital Markets, in a comment on the poll's findings.

Ying noted that market-moving factors such as enthusiasm around artificial intelligence, sensitivity to geopolitical tensions in the Middle East, and U.S. tariff policies have all had a diminished impact recently. She also added that the gap in economic performance between Canada and the United States has started to narrow.

Economic Context

The outlook is supported by recent economic data from Canada. The country's economy grew by 3.4% in the second quarter, marking its most robust quarterly performance in over three years. This strong growth helps underpin the view that the Canadian economy is closing the performance gap with the U.S., potentially lending support to its currency in the longer term.