Can the Canadian Dollar Claw Back Losses Against the US Dollar in the Second Half of 2026?
(MORNINGSTAR) --"Nick Rees, head of macro research at Monex, expects a stronger Canadian dollar in the second half of the year, with oil prices likely to remain elevated and easing tailwinds for the US dollar.
“Geopolitical risk, which remains somewhat elevated, should continue to cool, while we remain skeptical around the prospect of [US] Fed rate hikes, anticipating that the Federal Open Market Committee will ultimately disappoint markets by staying on hold.” Any widening of the rate differential between the two central banks tends to drive the US dollar and dent the loonie.
While the Canadian currency has been depreciating so far this year, analysts remain optimistic about a second-half reversal. “Assuming [the trade deal] concludes with a little-changed agreement, then a boost to confidence should provide a tailwind to growth in the second half of 2026, enough to keep the Bank of Canada on hold and help the loonie claw back recent losses,” says Monex’s Rees. As of now, the trade agreement remains in its current form, though it’s entered a process of annual reviews after the US decided against a long-term renewal on July 1.