The Canadian Dollar Is Gaining Despite Trump's Latest Attack - USD/CAD Forecast

Market impact: Mildly CAD-positive / USD-CAD-negative in the short term, but not a decisive trend signal.

• The immediate message is that political criticism from Washington has not produced a lasting risk premium in USD/CAD. The pair was reported at 1.3774, after two consecutive daily declines, while Scotiabank’s model estimated equilibrium near 1.3756. This suggests the Canadian dollar is trading broadly in line with fundamentals rather than being materially overvalued.

• The key market mechanism is the combination of higher oil prices and valuation support. With WTI above $90, Canada’s export and terms-of-trade position improve, providing a natural offset to trade-related CAD pressure. This is supportive of CAD crosses, particularly while energy prices remain elevated.

• The political risk should nevertheless be treated as a potential volatility catalyst, not ignored. The article characterizes the US complaint as political signalling rather than a clearly defined exchange-rate policy. If the US Treasury later makes explicit demands regarding the Canadian dollar, markets could price a higher bilateral trade and intervention risk premium, pushing USD/CAD higher even if fundamental valuation remains neutral.

• For USD/CAD, the near-term bias is therefore modestly lower or range-bound, provided oil stays firm and Washington’s rhetoric does not become formal policy. The fundamental argument is not strong enough on its own to imply an extended CAD rally: the source also lists a Q3 2026 USD/CAD forecast of 1.4006, indicating that medium-term risks remain capable of favoring the US dollar.

• The bearish-CAD interpretation would be reinforced by a deterioration in Canada–US trade relations, concrete tariff or currency-related measures, weaker oil, or a widening US–Canada rate differential. Conversely, continued oil strength, stable Canadian external balances, and the absence of Treasury follow-through would reduce the likelihood that the political comments generate a sustained USD/CAD upside move.

What traders should monitor next:

US Treasury comments, implementation of retaliatory trade measures, WTI’s ability to remain above recent highs, Canada–US interest-rate expectations, and whether USD/CAD can hold close to the reported Scotiabank fair-value area rather than developing a larger premium.