Foreign Exchange Outlook

Scotiabank maintains a bearish outlook on the USD through 2027, driven by anticipated Fed rate cuts to 3.00% and structural deficits. This provides a supportive backdrop for major currencies like the EUR, JPY, and CAD, despite localized political and trade-related risks.

Key Takeaways

• 1.The USD is expected to experience broad-based weakness against major developed economy currencies through 2026 and 2027.
• 2.The Federal Reserve is forecast to cut rates by 75bps in 2026, reaching a terminal rate of 3.00%.
• 3.The Bank of Canada is expected to remain on pause until late 2026, followed by 50bps of tightening to align with the Fed.

Table of Contents

• Market Tone
• FX Forecasts
• CAD FX Forecasts
• Federal Reserve & Bank of Canada Monetary Policy Outlook
• North America
• Major Currencies
• Australia
• Latin America

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