The Canadian dollar spent much of the last half of 2025 unloved, but optimistic economic data and a more favourable outlook on interest rates in Canada and the United States have many analysts calling for

the loonie to turn around in 2026. “A recent uptick in the macro data has seen us turn slowly, but progressively, more positive on the Canadian dollar,” Nick Rees, director of macro research at Monex Europe Ltd., said in a note.

Stronger-than-expected job creation in October and November and third-quarter gross domestic product (GDP) of 2.6 per cent annualized, compared with forecasts for 0.5 per cent, have economists reassessing the Canadian economy

and the currency . Monex expects the Canadian dollar to start the new year around 72 cents U.S. and end the year at 75.9 cents U.S. It was trading at around 73 cents U.S. on Monday afternoon.

CIBC Fixed Income, Currency and Commodities also expects the Canadian dollar to enter 2026 at 72.5 cents U.S., but exit 2026 around 74 cents U.S.

“The loonie has been pushed and pulled over the past few weeks but is likely to sustain some positive momentum in 2026,” it said in a note.

Besides a less dire economic outlook, continued interest rate cuts by the

U.S. Federal Reserve should provide more lift to the loonie over the year, economists say, especially after the Bank of Canada indicated it is comfortable with its current benchmark lending rate.

A shrinking interest rate differential between U.S. and Canadian rates has historically helped boost the loonie, and markets are betting the Fed will cut two more times in 2026, after cutting three times this year.

“The Canadian economy should continue to gain support at the margin from easing at the Fed,” Rees said.

The Canadian dollar had a tumultuous 2025. Early in the year, it fell to almost a decade-low 68.8 cents U.S. as the threat posed to the Canadian economy by U.S. President Donald Trump’s

tariffs began to unfold . From there, the loonie rebounded 7.2 per cent to a high for the year of 73.7 cents U.S. as the greenback fell out of favour, with an index that measures its value against a basket of major currencies plummeting.

Investors fled the U.S. dollar because of Trump’s Liberation Day tariff plan, which he subsequently backed away from, and rising federal debt.

From that June high, the loonie gave back some of those gains to trade just below 71 cents U.S. in early November.

During that period, the Bank of Canada cut rates two times , opening up the rate differential gap between the loonie and the U.S. dollar, making the latter more attractive to investors.

Now, the Canadian currency is clawing back and is up about 4.7 per cent for the year against the U.S. dollar.

Shaun Osborne, chief currency strategist at Bank of Nova Scotia’s global economics and FX strategy, expects the Canadian dollar to finish 2026 at 75.1 cents U.S.

“Our macroeconomic forecasts (particularly regarding monetary policy) support the outlook for some strengthening in the (Canadian dollar) over the medium-to-longer term,” he said in a note, though he said trade risks with the U.S. “are a clear and present danger for the (Canadian dollar) and Mexican peso in the coming year.”

Economist David Rosenberg recently reversed his long-held bearish outlook for the Canadian dollar and has a target of 77 cents U.S. for 2027.

“That may end up proving conservative,” he said in a column for the Financial Post.

Rosenberg listed 10 reasons to explain his change of heart, including that the Bank of Canada appears done with rate cuts, better-than-expected GDP and the improvement in Canada’s productivity.

Karl Schamotta, chief market strategist at Corpay Inc., is calling for the Canadian dollar to enter 2026 at nearly 73 cents U.S. and end the year at 75.8 cents U.S.

However, he said long-term currency forecasts have a habit of being wrong, citing in a note the example of 12-month euro-U.S. dollar projections that missed the mark by an average of seven cents U.S. from 2007 to 2025 and also got the direction wrong more than half of the time.

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