USD/CAD & USD/MXN H2 2026 Outlook: Is Fed policy putting USD back in control?

The article argues that USD/CAD and USD/MXN may trend higher in H2 2026 as the Fed turns more hawkish while the Bank of Canada and Banxico remain comparatively neutral. U.S. inflation is still above target at 4.2%, prompting markets to price in possible Fed hikes before year-end, which supports the dollar’s rate advantage and safe-haven appeal. By contrast, Canada’s policy rate is 2.25% and Mexico’s is 6.5%, but Banxico has paused after a gradual cutting cycle. Geopolitical easing in the Middle East could reduce the dollar’s safe-haven bid, especially against MXN, but weaker oil-linked Canadian fundamentals could still leave USD/CAD elevated. Technically, USD/CAD has broken above a long-term bearish trendline, signaling bullish momentum, while USD/MXN is losing bearish momentum and may shift into a range unless key support/resistance levels break. Overall, the outlook is moderately bullish for the dollar versus both North American peers.