FXStreet reported Friday that TD Securities expects USD/CAD to remain above 1.40 in the near term, with the U.S. policy rate still higher than Canada's.
The Bank of Canada's reference value for Oct. 23 was C$1.3993 for every US$1. FXStreet alone reported the October TD view, saying the firm shifted expected quarter-point rate increases to December and January from January and March and gave a 1.38 year-end USD/CAD target. The outlet did not specify which years the hike months or year-end target referred to.
FXStreet also said TD expected a more Canadian-dollar-friendly backdrop in Q1 2027, when rate increases are expected to start and Canada's recovery to strengthen.
TD's public Sept. 14 Global FX Monthly forecast the pair at 1.38 for Q4 2026. In that report, the firm said U.S. tariffs posed a risk to Canada's recovery and could extend the Bank of Canada's pause; it estimated the measures could reduce GDP by 0.4% by 2027. TD also said a possible Federal Reserve increase could widen the rate gap and compared a potential return of broad U.S. dollar weakness after the midterms with the 2018 election cycle.
The policy benchmarks were at different levels: the Bank of Canada held its overnight target at 2.25% on Sept. 2, then the Federal Reserve raised its federal-funds range by 25 basis points to 3.75% to 4.00% on Sept. 16.
Statistics Canada reported that September consumer prices were 3.1% higher than a year earlier, compared with 3.0% annual inflation in August. Removing gasoline from the index, the annual increase slowed to 2.2% from 2.4%; gasoline prices rose 27.8% year over year, up from 22.8% in August. Employment declined by 68,000, or 0.3%, and the unemployment rate rose 0.1 percentage point to 6.5%.
The Bank of Canada is scheduled to announce its next rate decision and publish its Monetary Policy Report Wednesday, Oct. 28, at 9:45 a.m. ET.
