TD Securities strategists report that a softer Canadian Consumer Price Index (CPI) is driving the USD/CAD currency pair higher, with rate divergence remaining a significant factor influencing the exchange rate [1]. The strategists note that broad US Dollar (USD) strength is expected to limit any substantial downside for USD/CAD below the 1.40 level, as the threshold for the Federal Reserve to hike rates is perceived to be lower than that for the Bank of Canada [1].
TD Securities highlights that while higher oil prices resulting from another global supply shock could support the Canadian Dollar (CAD) on various currency crosses, this effect is not expected to strengthen CAD against the USD [1]. The firm’s forecast projects that USD/CAD will remain around 1.39 through the second half of 2026 [1].
The strategists also mention that they recently took profit on their long USD/CAD put spread, reflecting the impact of the softer CPI report and ongoing rate divergence [1]. No specific market reactions or analyst opinions beyond TD Securities’ outlook are provided in the article [1].
CONCLUSION
TD Securities sees the Canadian Dollar remaining under pressure against the US Dollar due to ongoing rate divergence and a softer CPI. Their forecast suggests USD/CAD will stay near 1.39 through H2 2026, with broad USD strength capping any significant CAD gains against the USD.