Bank of America says the Bank of Canada will likely hold policy rates steady through most of 2027 and let the loonie slide further. The Canadian dollar fell to C$1.417 per U.S. dollar, its weakest intraday level since April 2025. Manufacturers importing steel and aluminum will feel the pinch as dollar‑denominated inputs rise.

The move reflects a shift from earlier expectations that Canada would pre‑empt Fed hikes to protect inflation. With oil prices easing and the Fed signaling rate hikes, market participants price a divergence between the two economies. Bank of America projects the policy pause will persist, limiting the central bank’s ability to curb inflationary pressure. The policy gap also influences bond yields, widening the Canada‑U.S. spread.

Investors should watch the loonie’s trajectory as it feeds into commodity‑linked earnings and corporate cost structures. A weaker currency may support tourism and resource exporters, yet it could also pressure consumer price indices, prompting political scrutiny. Retailers with imported inventory may see margins squeezed, prompting price adjustments.