National Bank of Canada economists St\u00e9fane Marion and Kyle Dahms report that the Canadian dollar rose when WTI reached $100 after the Iran conflict began, but later weakened. They forecast USD\/CAD at 1.41 in Q2 2026.<\/p>\n
Markets are pricing close to 50 basis points of Bank of Canada tightening this year, yet the CAD has fallen 2.1% against the US dollar. The economists link the move to broader depreciation across major currencies.<\/p>\n
They describe Canada as relatively insulated from a global oil supply shock, supported by a strong energy trade surplus and a large fossil-fuel trade balance relative to GDP. They say this reduces the likelihood of positioning becoming as negative as at the end of last year.<\/p>\n
They state the energy buffer may support resilience but does not justify Bank of Canada tightening in their view. January GDP rose by +0.1%, and 9 of 20 sectors posted monthly output gains.<\/p>\n
They expect more CAD depreciation through Q2 due to the prolonged Iran conflict and a shift away from tightening expectations. For H2 2026, they project CAD gains if Washington\u2013Ottawa trade talks improve and Ottawa sets clearer pro-energy and industrial policies.<\/p>\n
Even though the Canadian dollar briefly strengthened when WTI crude oil hit $100, that momentum is gone. The currency has fallen 2.1% against the US dollar since then, and we see this trend continuing in the near term. We expect the USD\/CAD exchange rate to reach 1.41 during this second quarter.<\/p>\n
The primary reason for this is that markets have given up on the idea of the Bank of Canada raising interest rates. After the last policy meeting in March 2026 resulted in a hold, weak economic data like the mere 0.1% GDP growth in January has reinforced that the central bank will remain on the sidelines. This removes a key pillar of support for the loonie.<\/p>\n
While Canada\u2019s significant energy trade surplus does offer a cushion, it is not preventing the currency’s decline. Looking at recent CFTC data, speculative bets against the Canadian dollar have increased, though not yet to the extreme levels we saw in late 2025. This suggests the energy buffer is preventing a collapse, but not the steady slide.<\/p>\n
For derivatives traders, this points toward strategies that benefit from a rising USD\/CAD. Buying call options with strike prices approaching our 1.41 target could be a viable way to position for further CAD weakness through the second quarter. Implied volatility may rise as the pair grinds higher, adding another dimension to these positions.<\/p>\n
Looking toward the second half of the year, a CAD recovery is possible but depends entirely on politics. For any sustained strength to appear, we would need to see concrete progress in trade negotiations with the United States regarding the CUSMA review and clearer pro-energy policies from Ottawa. Until there are signs of movement on those fronts, betting on a loonie comeback is premature.<\/p>\n
Create your live VT Markets account<\/a>\u00a0and\u00a0start trading<\/a>\u00a0now. <\/b><\/p>\n","protected":false},"excerpt":{"rendered":" Canadian dollar rose with $100 oil, then weakened; economists see USD\/CAD 1.41 by Q2 2026.<\/p>\n","protected":false},"author":103,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[59],"tags":[],"class_list":["post-46906","post","type-post","status-publish","format-standard","hentry","category-live-updates"],"acf":{"acf_article_selection_author":null},"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts\/46906","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/users\/103"}],"replies":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/comments?post=46906"}],"version-history":[{"count":0,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts\/46906\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/media?parent=46906"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/categories?post=46906"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/tags?post=46906"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}