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BMO Sees Canadian Dollar Appreciating by End 2026 as Long as USMCA Trade Review Doesn't Change Much

BY MT Newswires | ECONOMIC | 11/14/25 07:15 AM EST

07:15 AM EST, 11/14/2025 (MT Newswires) -- The Canadian dollar (CAD or loonie) averaged almost C$1.400 last month (US$0.715), weakening 1.1% against the US dollar, said Bank of Montreal (BMO).

So far this month, the Canadian dollar has weakened further to above C$1.406, faring relatively better than the norm as Bank of Canada easing prospects faded more meaningfully than those for the Federal Reserve, noted the bank.

While more aggressive Federal Reserve easing -- 100bps versus 25bps for the BoC into next year -- should continue to lift the loonie, BMO reckons it is going to lag its advanced economy peers.

The albatross around the Canadian dollar's neck is United States trade policy, stated the bank.

Currently, U.S.-Canada trade negotiations are suspended with the Trump Administration threatening another 10% tariff. The list of Section 232 'national security' tariffs impacting Canadian goods continues to expand, despite the USMCA stating that they wouldn't be applied to autos and parts and encouraging negotiation of things like tariff-rate quotas in other sectors, added BMO.

Even if current trade turmoil can be calmed, there's next year's formal review of the USMCA looming. As Fed rate cuts

and trade tensions tussle to drive the Canadian dollar, the bank looks for the currency to average C$1.400 next month and appreciate to C$1.333 (US$0.752) by the end of next year, assuming the USMCA survives relatively intact.

MT Newswires does not provide investment advice. Unauthorized reproduction is strictly prohibited.

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