Canadian Dollar Vulnerable to Near-Term Weakness, With Recovery Expected Next Year, CIBC Says

07:25 AM EDT, 09/28/2026 (MT Newswires) -- The Canadian dollar is likely to remain under pressure in the near term as additional Federal Reserve tightening widens the interest-rate gap between the United States and Canada, according to CIBC Capital Markets in a note. With the Bank of Canada unlikely to raise rates this year, trade-related weakness could push Canada's unemployment rate to 6.6% in the last quarter of this year, while elevated oil prices heighten inflation risks, wrote CIBC in the Friday note. The bank sees USD/CAD averaging CA$1.42 in the fourth quarter of 2026 from Friday's CA$1.41. Looking ahead, CIBC expects the Fed's October hike to be the final move in the current cycle. Meanwhile, US-Canada trade talks could result in the rollback of US Section 338 tariffs and avert additional tariffs planned for January. An improvement in Canadian growth could then allow the BoC to resume rate hikes in early 2027, supporting the Canadian dollar, said the bank. CIBC predicts USD/CAD at 1.37 by mid-2027, implying modest near-term upside for the pair before a stronger loonie recovery next year.