National Bank of Canada (NBC) economists Stéfane Marion and Kyle Dahms note the Canadian Dollar (CAD) initially outperformed after WTI hit $100, but has since weakened with USD/CAD now seen at 1.41 in Q2 2026. They stress Canada’s strong energy trade surplus and relative insulation from Oil shocks, yet expect only later CAD gains if trade talks improve and Ottawa delivers clearer pro-energy policies.

Energy buffer offsets but does not reverse slide

"Just a week after the Iran conflict erupted and WTI surged to $100 a barrel, the Canadian dollar stood out as the only reserve currency gaining ground against the U.S. dollar. Despite markets now pricing in close to 50 basis points of Bank of Canada tightening this year, the loonie has since lost momentum, joining the broader depreciation seen across major currencies with a 2.1% decline against the greenback."

"Canada is not any less relatively insulated from a global oil supply shock than it was before — if anything, that buffer remains firmly in place. That is why we would not expect speculators to turn as bearish on the CAD as they did at the end of last year, especially given the size of the country’s fossil-fuel trade balance relative to GDP."

"This may leave the Canadian economy somewhat more resilient in the months ahead, but not, in our view, enough to warrant Bank of Canada tightening. January GDP did beat consensus expectations (+0.1%), yet only 9 of 20 sectors recorded monthly output gains."

"At this stage, we expect somewhat more CAD depreciation through Q2 than previously anticipated, given the prolonged Iran conflict, and now see USD/CAD at 1.41 as markets unwind Bank of Canada tightening expectations. For H2 2026, however, we have not abandoned the prospect of CAD appreciation, provided trade discussions between Washington and Ottawa become more constructive and Ottawa delivers more credible pro-energy and industrial policy support."

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