CAD: Strength seen moderating on policy repricing – HSBC

HSBC analysts argue the Canadian Dollar (CAD) has outperformed most G10 peers during the Middle East conflict but now appears to be losing momentum. They expect CAD strength to moderate in the weeks ahead, with elevated Oil prices still supportive but relative monetary policy and Bank of Canada (BoC) expectations becoming more decisive for CAD performance.

CAD resilience expected to fade

"The CAD has outperformed most G10 peers during the Middle East conflict."

"This outperformance is beginning to ease, and we expect the momentum to moderate further in the weeks ahead."

"While elevated oil prices should provide some support for the CAD, particularly against energy-importing G10 currencies, we think relative monetary policy could be a more influential driver."

"Specifically, our economists expect the Bank of Canada (BoC) to remain on hold through 2026 and 2027, while recognising there are hawkish risks to the ratepath if energy disruption persists and inflation expectations rise significantly."

"With markets currently pricing in around two BoC rate hikes this year (Bloomberg, 26March 2026), the balance of risks looks skewed to the downside for the CAD in the near term, especially if labour market conditions soften further."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)