Bias: range-bound as CAD sits above its 90-day average but in the middle of the 3-month range versus AED, implying limited near-term movement as oil and the UAE peg stabilize the backdrop.
Key drivers:
- Rate gap: BoC trimmed rates to balance growth and inflation, while AED remains pegged to USD, keeping CAD/AED moves limited and tied to oil.
- Risk/commodities: Oil trades near 90-day highs, above the 3-month average and volatile, which can support CAD when oil strength persists.
- One macro factor: U.S. tariffs on Canadian steel, aluminum and autos weigh on exports and CAD.
Range: CAD/AED is likely to drift within its 3-month band, holding near the middle with occasional tests toward the upper end as oil and risk moves tug at the pair in thin trading.
What could change it:
- Upside risk: oil prices stay firm or a firmer Canada policy outlook could lift CAD toward AED.
- Downside risk: renewed US protectionism or a stronger USD could push CAD weaker against AED.
