A survey released by Reuters on Thursday (September 5) found that the Canadian dollar will give up some of its recent gains in the coming months, but if the central bank's easing cycle revitalizes the global economy and stimulates demand for commodities, the Canadian dollar may rise again in 2025.

Since hitting a nearly two-year low of 1.3946 Canadian dollars (71.71 US cents) in August, the Canadian dollar has risen 3.3% driven by short covering and the overall decline of the US dollar.

In a survey conducted from August 30th to September 4th, the median forecast of over 30 foreign exchange analysts showed that the Canadian dollar would fall by about 1% to 1.365 within three months, while the August survey expected it to be 1.380.

It is expected that the currency will rise by 1.3% to 1.3333 in one year, compared to the previous expectation of 1.3350.

Jimmy Jean, Chief Economist of the Desjardins Group, stated that "the increase in the Canadian dollar far exceeded our expectations" and said that if the expectation of the Federal Reserve's "massive" interest rate cuts begins to fade, the Canadian dollar may weaken in the short term.

Investors are paying attention to Friday's employment reports from the United States and Canada to see if central banks will relax policies by 50 basis points instead of 25 basis points. The unemployment rate in the United States rose to a nearly three-year high of 4.3% in July, causing turbulence in financial markets and raising concerns about an economic recession.

The Bank of Canada lowered its benchmark interest rate on Wednesday, marking the third time since June that it has lowered the rate by 25 basis points to 4.25%. It is expected that the Federal Reserve will begin its easing cycle later this month.

However, the effectiveness of monetary policy often lags behind, so it may take some time for the global economy to feel the impact of reduced borrowing costs. Canada is a major producer of commodities such as oil, so the Canadian dollar is often highly sensitive to global prospects.

Due to weak economic data released by the United States and major Asian countries reinforcing expectations of a weakening world economy, oil prices fell to their lowest level of the year on Wednesday.

By the second half of 2025, the effect of interest rate cuts should become more pronounced, "said Gene. We expect a slight rebound in oil prices in major Asian countries and Europe in the second half of 2025, so global demand will slightly push up oil prices.