Polling Insights: Canadian Businesses Stay Flexible Amid Market Shifts

Trade and political relations in North America are center focus for many business leaders around the world in January, as the new Trump Administration aimed trade threats to Canada and Mexico, sparking debates about how markets will respond in Q1. As treasury departments assess their hedging strategies and the future of operations in the region, data about currency values, expected rate changes, and proposed tariffs give decision makers context to stay flexible in a turbulent business environment.

We polled our LinkedIn audience of analysts, business owners, and finance influencers for their interpretations of economic metrics and see how politicians’ posturing makes waves (or doesn’t) in trading activities.

Looking at the Canadian Rate

The Bank of Canada last cut its policy rate in mid-December, by 0.50% to 3.25%. When polled on LinkedIn, our community members and analysts predicted continued rate easing into February. The poll results show:

• Cut rate by 50 bps: 17%
• Cut rate by 25 bps: 56%
• Leave rate unchanged: 17%
• Hike rate by 25 bps: 11%

The majority of our poll respondents thought the rate would take another cut, with 56% choosing a 25bps cut after the January 29th meeting. Other markers, including the price of overnight index swaps and general market data, have analysts agreeing that a BoC cut is highly likely.

The interaction between the BoC’s reading of the Canadian economy, proposed tariffs from the US, and the outlook for the value of the CAD/USD is high on many analysts’ radar, providing clues about how Corpay clients might trade and update hedging strategies in the near term.

Talking Tariffs and CAD Value in Q1 2025

When Corpay clients lay out their hedging strategies involving CAD this year, the macroeconomic factors currently on unsure footing will impact their decisions. The word on the tip of analysts’ tongues is ‘tariffs.’ Mark Allen, FX Trading & Derivatives at Corpay says, “Tariff talk between the US and Canada will dictate the direction of the CAD, but it’s a political hot potato.”

“A read-through of the Trump Administration’s memo on trade and other commentary indicates that tariffs are a key part of the policy platform. And while they have been delayed, they aren’t derailed,” says Peter Dragicevich, Currency Strategist – APAC at Corpay.

We decided to poll our community to understand broader ideas about what the value of the USD/CAD pair will be at the close of Q1 in the midst of the back and forth between Canada and the new Trump Administration. We asked:

• 39 or lower: 29%
• 40–1.42: 9%
• 43–1.45: 35%
• 46 or higher: 26%

Sentiment on LinkedIn was split, with a tie between the lowest and highest choices for the USD/CAD value (28.3%). This reflects the fluctuations in trade talks between the Trump Administration and Canada; analysts and business leaders are reading the signals in polar opposite ways.

After analyzing a speech made by President Trump at Davos that reiterated tariffs on Canada, Karl Schamotta, Chief Market Strategist at Corpay, notes that the “Canadian dollar climbed even after the president reserved his harshest words for Canada.” Schamotta reminds us that “Canada accounts for more than half of total US crude oil imports… by helping to correct a period of overvaluation in the Canadian dollar, Trump’s threats may ultimately help Canada regain competitiveness in global markets: using purchasing power parity valuations, the Canadian dollar is now steeply undervalued relative to fundamentals.”

Trump’s confrontational statements and agenda provoke strong reactions, but the market’s responses are not easy to unwind. This might make it challenging for businesses to create trading or hedging strategies in the near to medium term.

What Does This Mean for Businesses’ Hedging Strategies?

With numerous Corpay clients trading CAD and creating hedging strategies relative to its interaction with other currencies, we polled LinkedIn to understand business leaders’ broader evaluation of economic conditions during 2024.

• Business is up vs. last year: 41%
• Business is about the same: 29%
• Business is down vs. last year: 29%

General sentiment about business performance in 2024 is evenly split in polling results. When we focus on Canadian respondents, the lack of clear direction and leadership due to the departure of Prime Minister Justin Trudeau is creating anxiety and negatively impacting projections about Q1 performance.

Chris Nicholson, Senior Vice President, Commercial Director at Corpay, works with Canadian treasury managers to help them create hedging plans tailored directly to their individual business needs.

“The general sentiment shared by many corporations throughout the Canadian economy is that in 2025 they will face ongoing challenges. The many recent rate cuts delivered by the Bank of Canada over the past year have been welcomed by most, as the BoC has tried to catch up with managing concerns about re-establishing confidence and averting a recession,” says Nicholson.

“Concerns that Canada may be faced with a recession in the near future have reignited due to threats from the Trump administration of delivering up to 25% tariffs on Canadian goods imported to the US. These concerns are further confounded with the bad timing of new leadership not arriving until March 24, while the Trump administration continues to voice invoking tariffs as early as Feb 1,” he says.

Staying Vigilant and Flexible with a Plan

The current volatility in the North American region, according to Nicholson, underscores why it can be so important to have a plan aligned to your individual business goals. Having a plan means you can be more proactive and increase optionality in the case of a seismic event.

When you develop a long-term relationship with a dedicated FX account manager, you can interface with a professional who understands the nuances and relative impact of market moves on your business. If you’re working to create a hedging plan to better manage potential market disruptions to the Canadian market or the North American region more broadly, reach out to a dedicated Corpay account manager here: [link].