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Canadian dollar lags as BoC rate outlook falls further behind the Fed
Commerzbank forecasts USD/CAD easing toward 1.35 by late 2027, but says CAD performance remains tied to oil and shifting interest rate expectations.
Commerzbank FX analyst Michael Pfister said the Canadian dollar has been among the weakest performers in G10 this year, even as Canada’s real economy shows signs of a fragile recovery.
In the view cited by FXStreet, improving labour-market data, GDP surprises and stabilizing manufacturing PMIs have helped conditions, but USD/CAD has risen as markets revised down expected Bank of Canada policy moves, now pricing fewer rate hikes while the Fed remains more in focus.
Pfister attributed CAD’s recent weakness largely to relative interest rate expectations versus the US and to oil’s influence, noting Canadian exports benefit when energy prices rise, while oil-market volatility can obscure underlying economic momentum.
The outlook also hinges on energy risk, with the analyst saying the CAD trend is likely to continue unless shipping disruptions around the Strait of Hormuz are kept open, while Commerzbank expects EUR/CAD around 1.60 to 1.62.