Political uncertainty supports the uptrend of the Canadian dollar: Deutsche Bank analysis

Ser_APY_2000 · 2026-02-05T03:13:18+00:00

The essay discusses the current currency market dynamics influenced by Deutsche Bank's analysts, highlighting factors like potential tariffs on Canadian goods, which weaken the U.S. dollar. The outlook for Canada's economy and trade negotiations with the U.S. are explored, along with possible political pressures on the Federal Reserve that could lead to lower interest rates, affecting currency strength. Deutsche Bank predicts a gradual depreciation of the U.S. dollar against the Canadian dollar, reaching 1.35 CAD/USD by 2026, reflecting concerns about U.S. economic stability and Canadian recovery prospects.

Ser_APY_2000

2026-02-05 03:13:18

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Based on messages from financial analysts and Deutsche Bank’s expert assessment, an interesting situation is unfolding in the currency market. Bank analyst Michael Fister points to key factors that will shape the exchange rate dynamics in the coming months. The threat of implementing tariffs on Canada creates additional uncertainties amid the weakening of the US dollar.

Trump’s tariffs and their impact on the dollar

Recent reports indicate that the president is once again signaling the possibility of imposing trade barriers on Canadian goods. This creates instability in both commodity and currency markets. Overall, uncertainty regarding trade policy leads to a weakening of the US dollar’s position in international markets. This dynamic favors the Canadian currency, allowing it to gradually strengthen relative to its American counterpart.

Canadian economy and trade negotiation prospects

Canada’s economy has the potential to strengthen this year, but the outcome depends on the success of trade negotiations. If a comprehensive agreement with the US is not reached or if the terms of the North American Free Trade Agreement remain uncertain, the recovery pace could be cautious. These factors directly influence investor sentiment and forecasts for the currency pair.

Federal Reserve System and the risk of political interference

Financial analysts are actively discussing increasing concerns about potential political influence on the Fed’s independence. If such pressure materializes, it could lead to more aggressive interest rate cuts in the US. Lower interest rates make the US dollar less attractive to foreign investors, which in turn supports the strengthening of competing currencies, including the Canadian dollar.

Deutsche Bank forecast for 2026

Deutsche Bank experts predict a gradual decline in the US dollar to Canadian dollar parity. The bank aims for a figure of 1.35 CAD/USD by the end of 2026. This scenario is based on a combination of factors: US dollar weakening, potential recovery of the Canadian economy, and structural imbalances in the US market. This forecast reflects financial experts’ confidence in the medium-term strengthening of the Canadian currency amid global macroeconomic challenges.

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