Synopsis:
Goldman Sachs has revised its USDCAD forecasts lower, citing stronger-than-expected Canadian data, a supportive fiscal policy stance, and diminished expectations for Bank of Canada (BoC) rate cuts. While Canada’s close ties to the U.S. may limit broader gains on the crosses, Goldman expects the Canadian dollar to outperform the U.S. dollar through the remainder of 2025.
Key Drivers Behind the Revision
Emerging Trade War Effects
Canada’s recent payrolls report may be the first sign that the U.S.-led trade war is beginning to weigh on hard economic data beyond the U.S.BoC Defers to Fiscal Support
The BoC is emphasizing fiscal policy—not monetary easing—as the primary buffer against trade-related growth risks. This stance reduces the likelihood of aggressive rate cuts.CAD Supportive Backdrop
A combination of less dovish BoC policy expectations and proactive government stimulus is strengthening the outlook for the Canadian dollar, especially versus the USD.USDCAD Forecast Revisions
Goldman Sachs’ updated projections are:
• 3-month: 1.36 (previous: 1.40)
• 6-month: 1.35 (previous: 1.39)
• 12-month: 1.34 (previous: 1.38)
Conclusion
Goldman Sachs is growing more confident in the CAD’s relative strength against the U.S. dollar, supported by macroeconomic stability and policy alignment. However, due to Canada's close economic ties with the U.S., broader CAD gains on cross-currency pairs may remain limited.
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