Economists have lowered their forecasts for the Canadian dollar, citing growing uncertainty over the future of the Canada–United States–Mexico Agreement (USMCA). According to a new Reuters poll, concerns surrounding the trade pact have weakened expectations for the Canadian currency over the coming months.
The poll found that analysts now expect the Canadian dollar to make only modest gains against the U.S. dollar over the next year. Uncertainty over the ongoing USMCA review, combined with slowing economic growth and concerns about future trade relations with the United States, has reduced confidence in the currency’s outlook.
Economists also believe the uncertainty is making it less likely that the Bank of Canada will raise interest rates in the near future. At the same time, expectations that the U.S. Federal Reserve could maintain relatively higher interest rates have widened the gap between the two countries, putting additional pressure on the Canadian dollar.
The Canadian economy has also been affected by weaker growth, while key export industries such as steel, lumber, and automotive manufacturing continue to face trade-related challenges. Analysts say resolving the USMCA negotiations would improve investor confidence and provide stronger support for the Canadian economy and the loonie.
Despite the weaker outlook, economists expect the Canadian dollar to remain relatively stable if trade negotiations progress and domestic economic conditions improve. Market participants will closely watch upcoming developments in USMCA talks and future decisions by the Bank of Canada, as both are expected to play a major role in determining the direction of the Canadian currency in the months ahead.