USD/CAD: Choppy range then softer bias – TD Securities

TD Securities analysts expect a broadly neutral near-term impact on the Canadian Dollar (CAD) from a more balanced Bank of Canada (BoC) tone. With USD/CAD trading back near pre-conflict levels, they see the pair fluctuating around current levels through Q2 2026 before gradually moving lower toward 1.34 by year-end as their bearish USD view plays out.

TD sees range trade then gradual CAD gains

“Risks to Canada’s outlook are more two-sided now, allowing the BoC to strike a more neutral tone with limited CAD impact. We expect USD/CAD to chop around current levels through Q2 before eventually trending lower into H2 toward 1.34.”

“Risks to the Canadian outlook appear more balanced and two-sided now which should allow the BoC to keep a more cautiously neutral outlook without signaling the need for any imminent action. Against this backdrop, a more balanced tone—compared to the otherwise dovish communication we have seen from the BoC this year, should have a more muted impact on the CAD.”

“With USD/CAD back around pre-conflict levels and market putting peak geopolitical shock and uncertainty premia behind, we expect the USD/CAD to be choppy and trade around current levels through Q2.”

“We maintain our bearish USD lean in 2026 and see USD/CAD falling to 1.34 by year-end. USMCA poses an asymmetric risk for USD/CAD in our view – a deal in place is likely to lift CAD sentiment and positioning positively a lot more than lack of a deal. We expect USMCA compliant goods to remain exempt from tariffs irrespective of a deal.”

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)