Economic outlook
For Canadian businesses, Baig believes the outlook is relatively stable.
“A range-bound loonie, expected to stay between $1.35 and $1.40 CAD per USD, suggests relative currency stability,” he says. “For exporters, a weaker Canadian dollar (closer to $1.40) makes Canadian goods more affordable for US buyers, potentially boosting demand. For importers, a stronger loonie (closer to $1.35) helps reduce the cost of purchasing goods from the US. Overall, this stable range allows businesses to plan with more confidence, manage pricing strategies, and reduce currency-related risks.”
Looking further ahead, though, the balance is less certain.
“The Canadian dollar is fundamentally undervalued, and most forecasters are expecting a rise. But the currency is a shock absorber for the economy, and what happens will depend on whether the Canadian economy has a speedy recovery,” Baig says, noting two major risks. “Canada’s twin growth engines of making cars for the Americans and building houses for new residents are fundamentally challenged. Whether the economy rebounds or stays on the slow track depends on how quickly it can raise productivity and expand investment in the minerals sector.”
That leaves two potential outcomes.