Two major Canadian financial institutions have issued contrasting short-term outlooks for the Canadian dollar, reflecting uncertainty in global trade and monetary policy expectations. TD Securities projects that Canada’s trade surplus will narrow in the coming months, which could exert downward pressure on the loonie. In contrast, Scotiabank’s technical analysis suggests bullish signals for the CAD against the US dollar, pointing to a possible decline in the USD/CAD pair.
TD Securities’ forecast is based on softening global demand for Canadian exports and moderating commodity prices, particularly energy. The bank expects the trade balance—which has been positive—to contract over the next two quarters. A narrower surplus would reduce net foreign currency inflows, typically weighing on the CAD. Analysts at TD also note that interest rate differentials and global risk sentiment will play critical roles, and that the Bank of Canada’s policy stance could mitigate some of the weakness.
Meanwhile, Scotiabank’s FX strategy team cites bullish technical signals from price action and momentum indicators. They see the USD/CAD pair facing resistance at higher levels, and the Canadian dollar’s resilience is supported by a more hawkish Bank of Canada relative to the Federal Reserve, where rate cuts are anticipated. This monetary policy divergence is a key driver of the bullish CAD sentiment. A stronger loonie would lower import costs and help curb inflation, but could challenge exporters by making Canadian goods pricier abroad.
The mixed signals leave traders and investors monitoring trade data releases, oil prices, and central bank communications. With the next Statistics Canada trade report due in the coming weeks, clearer direction may emerge, but for now, currency markets face conflicting narratives.
