spent most of the second half of 2025 unloved, but
and a more favorable view of
in Canada and the US, many analysts are calling for
roll out in 2026.
“The recent strength in macro data has led us to slowly but gradually become more positive on the Canadian dollar,” said Nick Rees, director of macro research at Monex Europe Ltd.
Stronger-than-expected job creation in October and November and third-quarter gross domestic product (GDP) of 2.6 percent annualized, compared with forecasts for 0.5 percent, have economists reassessing the Canadian economy.
.
Monex expects the Canadian dollar to start the new year around 72 US cents and end the year at 75.9 US cents. It was trading at around 73 US cents on Monday afternoon.
CIBC Fixed Income, Currencies and Commodities also expects the Canadian dollar to enter 2026 at 72.5 US cents but exit 2026 around 74 US cents.
“The Canadian dollar has been subject to push and pull over the past few weeks but is likely to maintain some positive momentum into 2026,” the bank said in a note.
In addition to the less bleak economic outlook, the continued decline in interest rates
Economists say the Canadian dollar should provide more of a boost for the Canadian dollar as the year progresses, especially after the Bank of Canada said it was comfortable with its current benchmark lending rate.
A narrowing interest rate differential between U.S. and Canadian rates has historically boosted the Canadian dollar, and markets are betting the Fed will cut two more times in 2026 after cutting three times this year.
“The Canadian economy should continue to receive support from the Fed's easing policy,” Rees said.
The Canadian dollar had a turbulent year in 2025.
It fell to a near-decade low of 68.8 US cents earlier this year due to the threat posed to the Canadian economy by US President Donald Trump's policies.
. The Canadian dollar then jumped 7.2 percent to a one-year high of 73.7 U.S. cents as the greenback fell out of favor and an index measuring its value against a basket of major currencies fell sharply.
Investors fled the US dollar due to Trump's Emancipation Day tariff plan, which he later abandoned, and the growing federal debt.
From that June high, the Canadian dollar gave back some of those gains and was trading just below 71 US cents in early November.
During this period, the Bank of Canada
increasing the difference in exchange rates between the Canadian dollar and the US dollar, making the latter more attractive to investors.
The Canadian currency is now recovering and is up about 4.7 percent for the year against the US dollar.
Sean Osborne, chief currency strategist of global economics and currency strategy at Bank of Nova Scotia, expects the Canadian dollar to end 2026 at 75.1 US cents.
“Our macroeconomic forecasts (especially regarding monetary policy) support the prospects for some strength in the (Canadian dollar) over the medium to longer term,” he said in the note, although he noted that trade risks with the U.S. “pose a clear and present danger to the (Canadian dollar) and Mexican peso next year.”
Economist David Rosenberg recently revised his long-standing bearish forecast for the Canadian dollar to set a target of 77 US cents for 2027.
“This may end up being conservative,” he said in a Financial Post column.
Rosenberg listed 10 reasons for his change of heart, including that the Bank of Canada appears to be done with rate cuts, higher-than-expected GDP and improving productivity in Canada.
Carl Sciamotta, chief market strategist at Corpay Inc., calls for the Canadian dollar to enter 2026 at nearly 73 U.S. cents and end the year at 75.8 U.S. cents.
However, he said long-term currency forecasts have a habit of being wrong, citing in a note the example of 12-month euro-US dollar forecasts that missed the target by an average of seven US cents between 2007 and 2025, and were also wrong in direction more than half of the time.
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