The exchange rate forecast for USD to CAD reflects recent trends and expectations regarding both currencies, driven significantly by economic performance and market sentiment.
Currently, the US dollar (USD) is under pressure following a dovish interest rate cut from the Federal Reserve, which led to its decline to multi-month lows. Analysts noted a sharp rise in jobless claims, reaching a three-month high, contributing to a perception of a slowing U.S. economy. As traders anticipate further rate cuts in 2026, expectations of a weaker USD are growing, stemming from mixed U.S. economic data that signals slowing growth, despite a resilient labor market. The dollar index (DXY) has pulled back from recent highs, reflecting a shift in market sentiment towards risk assets, as equity markets stabilize and geopolitical tensions ease.
On the other hand, the Canadian dollar (CAD), or "loonie," has shown resilience, supported by rising exports and a healthy GDP growth rate. Recent data indicated a surprising uptick in Canadian exports and a 2.6% annualized GDP growth in Q3, which bolstered investor confidence in the CAD. However, falling oil prices, recently trading near 30-day lows, have raised concerns about potential downward pressure on the loonie, given Canada's status as a major oil exporter.
The impact of oil prices on the CAD is particularly crucial, as recent fluctuations have reflected a volatile environment. With oil currently trading 4.9% below its three-month average, and the loonie’s recent trading around 1.3780—about 1.3% below its three-month average—any further declines in oil could heighten vulnerabilities for CAD.
Forecasts suggest medium-term volatility for the USD/CAD pair, influenced by both the Fed's next moves and the Bank of Canada's policies. As the CAD may be affected by commodity price movements and global risk sentiment, any significant changes in oil prices or unexpected economic data could sway the exchange rate significantly. Thus, market participants should closely monitor these factors as they navigate international transactions in the coming months.
