The Canadian dollar hit a six-month high of 1.3700 on Monday, June 2nd, but was slightly down on Tuesday morning at around 1.3730. Overall, the Canadian dollar is expected to remain relatively stable and potentially eke out additional gains against the U.S. dollar over the summer months.
What’s Driving the USD/CAD Price?
While it might seem like the Canadian dollar is surging, it’s more about the U.S. dollar’s decline. The U.S. is grappling with significant fiscal challenges, with its national debt surpassing $36.5 trillion and annual interest payments exceeding $1 trillion, outpacing defense spending. High-profile figures like JPMorgan CEO Jamie Dimon have voiced concerns about potential cracks in the bond market due to these fiscal strains.
Adding to the debt pressure, President Trump’s proposed “One Big Beautiful Bill” aims to introduce substantial tax cuts, potentially increasing the national debt by up to $4 trillion over the next decade. This has led to credit rating downgrades and heightened investor anxiety, further weakening the USD.
Canada’s Economic Landscape
On the home front, Canada is showing resilience. The Bank of Canada is expected to maintain its interest rate at 2.75% during its upcoming announcement on June 4, 2025, following a stronger-than-anticipated GDP growth of 2.2% last quarter. This makes it almost a certainty that the BoC will stand pat at its next meeting on June 4. While future rate cuts are anticipated, the BoC’s current neutral stance is helping backfill some of the relative strength the CAD is experiencing.
Looking Ahead
The CAD’s recent strength reflects U.S. dollar weakness more than domestic momentum. With the U.S. facing deep fiscal issues and the BoC further along in its rate-cutting cycle than the Fed, the Canadian dollar may continue to look like a relatively stable option—potentially pushing USD/CAD toward the mid to low 1.36 range.
The Canadian dollar is currently trading at 1.3719 CAD against the US Dollar.
