A Reuters poll of 32 foreign exchange analysts, conducted between Aug. 31 and Sept. 2, points to a modest near-term weakening for the Canadian dollar followed by moderate gains over a 12-month horizon if tensions with the United States are resolved.
The median forecast calls for the Canadian dollar to move to 1.39 per U.S. dollar - equivalent to 71.94 U.S. cents - in three months, a 0.4% decline from current levels and slightly firmer than the prior months 1.40 three-month projection. Over a 12-month horizon analysts expect the currency to strengthen 1.8% to 1.36 per dollar, improved from a previous 1.3660 forecast.
Market strategists surveyed framed the path for the loonie around two central considerations: the evolution and eventual resolution of trade tensions with the United States, and the relative trajectory of Canadian macroeconomic data.
"While we are bearish on the loonie in the short term, we expect many of the factors currently weighing against the Canadian dollar to fade," said Nick Rees, head of macro research at Monex Europe. "Trade tensions with the U.S. should eventually be resolved with a deal, regardless of present posturing, allowing domestic macro data to recover."
The backdrop to those comments includes new U.S. measures enacted last month, when Washington imposed fresh 50% tariffs on at least $20 billion of imports from Canada after bilateral talks collapsed. The Bank of Canada on Wednesday left its benchmark interest rate on hold at 2.25% and said it does not expect the tariffs to have a large direct impact on the economy. The central bank also noted that the ongoing Middle East conflict had raised upside risks to the inflation outlook.
Beyond geopolitical and trade developments, some currency strategists pointed to monetary policy differentials and domestic investment as drivers of medium-term performance. "We do expect a modest strengthening to 1.35 by end of next year," said Mirza Baig, a foreign exchange strategist at Desjardins. "We believe this will come about as the gap between U.S. and Canadian interest rates will narrow, and investment spending in Canada will accelerate."
Investors in the poll anticipate roughly 100 basis points of additional tightening from the Bank of Canada by the end of 2027, a shift that would move the policy rate toward the top of the central bank's estimated 2.25% to 3.25% range for the neutral interest rate - the level at which borrowing costs are neither slowing nor boosting the economy.
The polls results reflect a conditional outlook: near-term downside risk to the loonie tied to trade tensions and current macro headwinds, with the prospect of recovery dependent on a resolution to those disputes and a normalization of domestic economic indicators. Analysts' projections therefore hinge on developments in trade negotiations, monetary policy differentials and the path of Canadian investment and inflation data.
Methodology note: The forecasts summarized here are the median responses from 32 foreign exchange analysts polled between Aug. 31 and Sept. 2.