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Scotiabank Staying Bullish on the Canadian Dollar Over the Medium-Term

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Scotiabank is maintaining a medium-term bullish view on the Canadian dollar (CAD), on an outlook that central bank policy will narrow US-Canada policy rate differentials. The CAD entered Q3 slightly recovering its 2% Q2 decline versus the US dollar, wrote Scotiabank in a note.

"The forecasted Fed easing is paired with 75bps of tightening from the Bank of Canada, leaving the BoC at 3.25% by the end of our forecast horizon," the report said.

The analysts acknowledged that "sentiment and positioning" continue to lean bearish on CAD, which is a "major vulnerability."

Scotiabank recently adjusted its USD/CAD forecast and has a Q4 2026 target at $1.37 and a Q4 2027 target at $1.33.

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