TD Securities forecasts the Canadian dollar weakening to 1.38 against the USD as the Bank of Canada maintains rates through 2026.
TD Securities expects USD/CAD to converge toward 1.38 in the near term after the Bank of Canada held its benchmark rate at 2.25%. The decision, widely anticipated, kept a balanced tone amid heightened geopolitical risks and mixed economic signals.
The Bank of Canada maintained its cautious stance, citing elevated downside and upside risks tied to the Iran conflict. TD projects no policy changes through 2026, with inflation containment and stable growth justifying the hold. The next rate move is forecast for early 2027, likely a hike.
Markets retained a modest tightening premium following the BoC’s decision, supporting a stronger USD/CAD. TD noted front-end rates appear fairly valued, with no immediate catalyst for a shift in the Bank’s approach.