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Canadian dollar steadies after Q3 rebound as USD/CAD nears 1.40
A National Bank of Canada team cited a Q3 loonie rally tied to firmer oil and gold, after USD/CAD briefly fell to 1.377 on Aug. 21.
National Bank of Canada analysts Marion and Dahms said the Canadian dollar’s Q3 rally has paused after pushing USD/CAD briefly below 1.38, with the pair moving back above that level.
They linked the advance to positive Canadian economic surprises plus higher oil and gold prices. USD/CAD fell as low as 1.377 on Aug. 21 after a breakdown in Ottawa and Washington trade negotiations, compared with around 1.42 at the end of June. The analysts said the loonie is up roughly 2.5% quarter to date versus the greenback.
The team cautioned that renewed trade uncertainty from new U.S. tariffs could weigh on Canadian growth. They also pointed to elevated geopolitical risk, noting that market-implied odds of normalization in the Strait of Hormuz by year end have fallen below 30% from above 50% earlier.
Looking ahead, the analysts expect a near-term rebound in USD/CAD toward 1.40 before a renewed move lower toward 1.33 by 2027, assuming Canada-U.S. trade talks ultimately produce a favorable outcome and tariff risks subside.
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