CIBC Capital Markets expects the Canadian dollar to trade around 1.42 U.S. dollars in the fourth quarter of 2026. The forecast assumes the Federal Reserve will continue tightening monetary policy while the Bank of Canada keeps its policy rate unchanged throughout the year.
The firm does not anticipate a BoC rate hike before year‑end, even though market pricing has priced in one. CIBC projects the USD/CAD pair to fall to 1.39 in the first quarter of 2027, 1.37 by mid‑2027 and 1.35 by the fourth quarter of 2027.
At the time of reporting, the pair was quoted at 1.4151, up 0.09% on September 23. CIBC notes that higher oil prices could lift Canadian headline inflation, but expects any upward pressure to be offset by economic slack stemming from trade tensions with the United States.
Canada’s unemployment rate is forecast to rise to 6.6% in the fourth quarter. The outlook improves in 2027 as CIBC anticipates a rollback of Section 338 tariffs and a broader U.S.–Canada trade agreement, factors that could support growth and allow the BoC to consider a rate increase early next year.
