It’s been a tough ride lately for the U.S. dollar. After a prolonged period of flexing its muscles against global currencies, the greenback is finally starting to cool off—and that’s catching the attention of investors, traders, and everyday Canadians.
So, what’s going on? And more importantly, what does it mean for the Canadian dollar?
What’s Pressuring the USD?
There are a few key reasons the outlook for the U.S. dollar has turned more negative:
The Fed is (finally) shifting gears.
After one of the most aggressive rate-hiking cycles in modern history, the Federal Reserve is now talking about cutting rates. Inflation in the U.S. has cooled faster than expected, and economic data is showing signs of a slowdown—especially in manufacturing, consumer spending, and job growth. Lower interest rates typically reduce the appeal of the U.S. dollar because investors earn less from dollar-denominated assets.
Debt drama and political noise.
U.S. debt levels have ballooned, and while that’s nothing new, investors are growing increasingly uneasy about America’s long-term fiscal path. Add in the uncertainty associated with President Trump’s unpredictable leadership style, and you’ve got another layer of concern weighing on sentiment.
Tariffs and global diversification.
Countries and investors around the world are not just talking—they’re taking real steps to reduce their reliance on the U.S. dollar. Whether it’s central banks diversifying their reserves or consumers putting down that bag of Florida oranges, trade partners are slowly shifting away from U.S.-centric commerce. The long-term trend? A move away from a USD-dominated world.
How the CAD Fits Into This
For the Canadian dollar, a weaker U.S. dollar can be both a blessing and a curse.
The Good:
- When the USD drops, the CAD usually gains by default—especially if the Bank of Canada holds its ground on rates longer than the Fed.
- A stronger loonie makes it cheaper to import goods priced in U.S. dollars, which helps ease inflation here at home.
- If oil prices stay firm (and they’re showing signs of life), that’s a win for the CAD, since Canada is a major oil exporter.
The Not-So-Good:
- If the U.S. economy slows too much, it could hurt Canadian exports—after all, the U.S. is our largest trading partner.
- A stronger Canadian dollar makes our goods more expensive abroad, which could put pressure on our manufacturing and tourism sectors.
Bottom Line — What’s Ahead for the Loonie?
The shift away from the U.S. dollar isn’t just a blip—it’s driven by real global dynamics in economics, monetary policy, and sentiment. But what does the near future hold for the loonie? Here’s what banks and analysts are projecting:
- TD Economics predicts the USD/CAD will hover around 1.39 through Q2, drifting to 1.35 by fall and moving closer to 1.37–1.38 by the end of the year.
- HSBC sees USD/CAD easing to about 1.44 by late 2025 (down from a prior forecast of 1.47), while Standard Chartered expects it nearer 1.37.
- Goldman Sachs is more optimistic for the loonie, projecting USD/CAD at around 1.34 in 12 months.
- Meanwhile, Trading Economics models anticipate the loonie at C$1.40 per USD by quarter’s end.
What does this all mean? Most forecasts cluster between 1.37 and 1.44 over the next 12 months, leaning toward modest CAD strength if Canadian inflation holds and U.S. rate cuts lag. But potential U.S. tariffs or dollar resurgence could temporarily stall progress.
In short: While economists differ on exact levels, the consensus is that the loonie will likely trade in the 1.37–1.40 range in the near term, with upside potential into the 1.35–1.37 zone into late 2025 if the Bank of Canada holds firm and oil continues its rebound.
The Canadian dollar is currently trading at 1.3869 CAD against the US Dollar.
