1Q26_ Quarterly Outlook Report_Final_EN - Flipbook - Page 45
T H E P LUMB LI N E | A RETU RN TO F I RS T PRI N CI PL ES
FOREIGN EXCHANGE OUTLOOK
Shaun Osborne
Managing Director & Chief
Currency Strategist
Eric Theoret
Associate Director,
Foreign Exchange
Strategist
4Q25
1Q26f
2Q26f
3Q26f
4Q26f
1Q27f
USDCAD
1.37
1.38
1.35
1.34
1.33
1.32
EURUSD
1.17
1.18
1.18
1.22
1.22
1.23
GBPUSD
1.35
1.32
1.34
1.36
1.37
1.38
USDJPY
157
147
145
142
140
137
USDCNY
6.99
7.10
7.05
7.05
7.00
7.00
USDMXN
18.01
18.84
19.01
19.23
19.38
19.78
USDCOP
3775
3,994
4,016
4,026
4,045
4,065
USDCLP
901
880
870
870
870
870
USDPEN
3.36
3.49
3.43
3.47
3.45
3.50
Source: Bloomberg Finance LP, Scotiabank Economics, Scotiabank GBM Foreign Exchange Strategy forecasts dated December 11, 2025
Key conclusions
•
The U.S. dollar (USD) has traded relatively rangebound since mid-2025, reflecting a
balance of resilient growth tempering Fed cuts bets against easing trade tensions that
have supported risk sentiment.
•
Our base case remains that the still rather overvalued USD will weaken over the current
year and into 2027 amid a slowing U.S. economy and ongoing easing by the Fed that
would weaken the dollar’s “exceptionalism.” USD losses could accelerate if fundamental
developments bolster the Fed doves’ case for more aggressive easing.
The U.S. dollar (USD) has traded relatively rangebound since mid-2025, reflecting some recent
easing in trade tensions on the one hand and resilient growth trends that have tempered Federal
Reserve (Fed) rate cut expectations on the other.
We have recently marked to market some of our near-term forecasts, moderating our
expectations for USD weakness over the coming quarters in response to recent developments.
But our base case remains that the still rather overvalued USD will weaken over the current year
and into 2027 – for several reasons.
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