Foreign exchange analysts say Canada's battered currency is expected to rebound modestly against the U.S. dollar in the second half of 2025, bracing for a flurry of political and economic risks in the coming months.
The crazy currency (CADUSD=X) is trading at its lowest level against the US dollar since March 2020. The sudden resignation of Finance Minister Chrystia Freeland on Monday added to downward pressure on the currency that has been in place since US President-elect Donald Trump's election victory. November.
President Trump, who is set to take office for a second term next month, has threatened to impose a 25% tariff on Canadian imports. It is unclear how this plan will come to fruition. Experts say President Trump may balk if U.S. consumers face higher prices due to a trade war.
Karl Sciamotta, chief market strategist at Kopay, said the lunatic was already facing strong headwinds before the recent political drama.
“The underperformance of the Canadian dollar has become even more severe over the past two years,” he said in his firm's 2025 outlook. “Weak commodity prices, weak investment and rising household borrowing costs, the heaviest in the G7 countries, are weighing on economic growth, forcing central banks to ease policy more aggressively than the Federal Reserve. There is.”
Kopay predicts that the US dollar/Canadian dollar (CAD=X) will fall from its current level to $1.42 in the first quarter of 2025, then $1.40 in the second quarter, and $1.00 in the third quarter. 38, and expects it to fall to $1.36 in the fourth quarter.
“The outlook may brighten as the year progresses,” Sciamotta wrote. “The Bank of Canada's mitigation efforts could lead to a sustained recovery in consumer spending and housing activity, while the spillover effects of solid U.S. growth could strengthen other sectors of the economy.”
He added that a Conservative government replacing Prime Minister Justin Trudeau's Liberals in the next federal election could improve Canada-U.S. trade relations and aid Canada's potential recovery. .
“As the domestic and international situation stabilizes, the exchange rate could regain some lost ground by the end of the year,” Sciamotta said.
RBC Capital Markets analyst Daria Parkhomenko said Canada has a lot to lose if President Trump imposes 25% tariffs, with 80% of the country's merchandise exports going to the United States. , RBC also estimates that 12% of Canada's workforce is employed in the following industries: Export to America.
“Canada could be hit by extreme and long-term tariff measures (possibly targeted measures) due to negative implications for the U.S.,” Parkkhomenko said in the central bank's 2025 currency outlook report. “sexuality becomes lower,'' he said. “However, we cannot exclude the risk that additional tariff headlines will have a negative impact on the Canadian dollar.”
