Since we last wrote about the USD CAD currency pairing the Canadian Dollar has strengthened in value. According to Bloomberg $0.73 today buys you $1 CAD. About this time last year, you were lucky to pay $0.70 for a Canadian Dollar. Today we look at how strong the Canadian dollar might be in 2026.
According to the Bank for International Settlements the US Dollar / Canadian Dollar currency pairing is one of the 10 most popular currency pairings in the world. The daily turnover of the ‘Loonie’ is about $550 billion.
Mark Carney, the Prime Minister of Canada, is a veteran when it comes to how to guide an economy. Having been the Governor of the Bank of Canada during the global financial crisis, he then led the Bank of England through Brexit. And now, he is leading Canada through tariff turmoil and a hugely complex macro-economic environment. He said famously, last May that “Canada’s not for sale. It never will be for sale.”
Carney will have been in office for a year in March. During his time leading the world’s 9th largest economy, he has faced lots of challenges, including Liberation Day. At the same time the Canadian dollar has outperformed last year’s prediction by the Royal Bank of Canada or RBC, which suggested that it would end the year at $0.71 for a Canadian dollar (it actually ended on $0.72).
Of course, the outcome of the election was still unknown when the RBC made its prediction. An outcome that has proved to be a positive for the Canadian dollar.
With political stability in place, monetary policy takes center stage.
Interest Rates Stabilize
Tiff Macklem has been the Governor of the Bank of Canada since June 2020. After lowering the policy interest rate from 4.25% to 2.25% from September 2024 to October 2025, no further changes have been made in December or January policy meetings.
The central bank posted its outlook on January 28, 2026. In it the bank commented on how “the outlook is vulnerable to unpredictable US trade policies and geopolitical risks.”
It added further how “economic growth is projected to be modest in the near term as population growth slows and Canada adjusts to US protectionism.”
Headline Inflation Cools, but Grocery Bills Sting
In January the inflation rate in Canada slowed to 2.3%.
“Of the affected indexes, the CPI continued to be most impacted by acceleration in prices for restaurant meals, and to a lesser degree, prices for alcoholic beverages, toys and children’s clothing,” Statistics Canada’s January release noted.
Market participants have commented on how the 2 per cent target set by the Bank of Canada is realistic. Albeit some have suggested that the central bank is too concerned about risks.
Unemployment drops whilst Productivity trails
The RBC published a cautious forecast update in January. In it the bank highlighted how Canada would experience zero population growth in 2026 for the first time on record.
The drop in population growth is offset by a gradually declining unemployment rate which the bank believes will decline from 6.8% to 6.3% by Q4 2026. Falling unemployment could support the Canadian dollar by boosting consumer spending.
However, productivity growth specifically in the US may be unsustainable, which could lead to a return of labor shortages in Canada, due to its dependence on US exports.
Nevertheless, the RBC forecasts 1.3% growth in per-capita and total GDP in 2026.
Oil and Commodities Remain Key Drivers
The price of a barrel of oil may have been rising recently; however, the long-term prospects are not ideal. The US likes to buy Canadian oil due to oil refineries that are based in the American Midwest that rely on it, some of them source the majority of their crude from Canada.
In October last year Carney met with Trump at the White House where they spoke about topics like North America’s interwoven supply chain. Carney later highlighted how Trump’s protectionism has permanently altered the ties between the two longtime allies.
There is a new pipeline being discussed that could boost hopes for increasing oil exports. These exports would be to destinations like Japan or India. Carney sees this export market doubling in size. In the meantime, the S&P / TSX Composite Energy Index in Canada hit record levels not seen since before the global financial crisis. There is optimism in the markets in Canada.
Carney has also just recently negotiated an annual quota of 49,000 Chinese EVs that can enter Canada at a low tariff rate. He is off to India next to negotiate yet another trade deal. Trump and the US Congress are watching closely.
How Does Canada Stand Economically?
The last outlook from Standard & Poor’s Global for Canada was in May 2025. At the time Canada’s outlook was ‘stable’ with ‘AAA/A-1+’ affirmed. This AAA rating stands in stark contrast to the U.S.’s AA+ downgrade in 2023, underscoring Canada’s fiscal prudence amid global debt spirals.
The IMF also published a statement about Canada in December 2025. The IMF mission confirmed that “Canada’s economy has held up better than expected despite a significant external trade shock.”
The mission added how “recent policy actions, including targeted support to affected firms and measures in Budget 2025 to encourage investment, have helped cushion the blow [from tariffs].”
The main constraint to long-term growth was Canada’s productivity shortfall.
When it came to Canada’s trade strategy, the IMF mission highlighted how diversification toward Europe and Indo-Pacific would strengthen resilience and lower reliance on the US. Shifting gears from U.S. reliance is like diversifying a portfolio; Europe and the Indo-Pacific offer new bull markets, reducing the risk of putting all eggs in one NAFTA basket
Canadian Dollar Predictions
If we look at some of the leading banks in Canada a clear picture emerges. The market expects the Loonie to do well in 2026.
Analysts at Scotia Bank are particularly positive. They suggest the Canadian dollar will rise to $0.75 by end of 2026, and $0.77 by end of 2027.
ING is also positive on the Loonie, suggesting it could go up to $0.746 by the end of 2026.
The National Bank of Canada, not to be confused with the central bank, has a similar prediction to that of Scotia Bank’s analysts. The bank suggests $0.74 by the end of Q2 2026, $0.75 by end of Q3, and $0.76 by the end of 2026.
The Royal Bank of Canada has also added its prediction. The bank suggests that the Canadian dollar can strengthen to $0.7463 by the end of 2026. This confirms the belief by some of the biggest financial institutions in Canada that the Loonie will gradually strengthen through 2026.
One thing that will certainly not have hurt the Canadian dollar’s trajectory is the recent US Supreme Court ruling. The ruling states that raising tariffs is the remit of Congress and not the President. Is this enough to dent Trump’s protectionist policies and the effect they are having on global economics though?
Author: Andy Samu
The editorial team at #DisruptionBanking has taken all precautions to ensure that no persons or organizations have been adversely affected or offered any sort of financial advice in this article. This article is most definitely not financial advice.
Currencies marked in this story are USD dollars unless otherwise stated.
See Also:
How the Canadian Dollar Responded to Mark Carney’s Election | Disruption Banking
How Strong Will the Canadian Dollar Be in 2025? | Disruption Banking
How Strong will the Price of Brent Oil be in 2026? | Disruption Banking
Canada: Staff Concluding Statement of the 2025 Article IV Mission | Disruption Banking
