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Morgan Stanley Sees US Dollar, Canadian Dollar Exchange Rate Remaining "Little Changed"

BY MT Newswires | ECONOMIC | 01/26/26 11:27 AM EST

11:27 AM EST, 01/26/2026 (MT Newswires) -- Morgan Stanley said it expects the Bank of Canada to remain on hold at Wednesday's policy meeting.

The labor market data has shown stabilization and inflation measures are running within the BoC's target range, wroet the bank in a note to clients.

Morgan Stanley doesn't predict near-term economic activity to show any meaningful sequential acceleration and so the bank's view remains that the BoC will be on hold.

Morgan Stanley thinks that the Canadian dollar (CAD or loonie) and BoC market pricing will be sensitive to potential revisions to gross domestic product forecasts in the Wednesday Monetary Policy Report. Governor Tiff Macklem was somewhat balanced in his tone regarding growth revision at the December policy meeting, so a revision higher could prompt investors to price more hikes into 2026.

The bank believes that the resilient labor market and moderating inflation leave little room for hikes to be priced out and that USD/CAD will remain relatively range-bound following the meeting.

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

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