Usdcad Will Decline Scotiabank

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Usdcad Will Decline Scotiabank

USD/CAD Will Decline Due To Oil

The Scotiabank's forecast for USD/CAD shows the Canadian Dollar will remain supported by the rate outlook and the oil prices.

This forecast comes at a time when the USD/CAD is trading in a tight range. However, the bank thinks that the US Dollar's strength is short-lived and the long-term path for USD/CAD is bearish.

Higher Oil Prices To Support Canadian Dollar

The key factor that supports the Canadian currency is the higher oil prices. In addition, the interest rate expectations also favor the Canadian economy in the long term.

The market participants are forecasting that the Bank of Canada will introduce a rate hike in July. By the end of October 2026, the BoC will tighten the policy by 30 bps.

Also, the yield spreads continue to narrow, and this will only support the Canadian Dollar. On the US side, the Fed is stuck between maintaining the policy rate and making a few more rate cuts.

So, the bottom line is that the BoC is expected to go with rate hikes while the Fed will maintain the policy or go with more rate cuts.

This fact alone tells us that the Canadian Dollar will gain strength in the coming quarters. So, the path of least resistance for the USD/CAD is downwards.

Also, the world is still running on oil despite all the talks about green and renewable energy. The oil prices are expected to stay elevated in the coming months, and this also favors the Canadian Dollar.

If we look at the technical outlook, the momentum also favors a bearish USD/CAD. So in the medium to long term, the CAD will gain strength against the US Dollar.

In fact, most of the major currencies are forecasted to gain ground against the US Dollar. So, it shouldn't come as a surprise when Scotiabank also forecasts a bearish USD/CAD in the medium to long term.

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