Recent forecasts and market updates indicate that the Canadian dollar (CAD) faces a complex relationship with various economic factors, particularly its dependence on oil prices and interest rate policies. As of late December 2025, analysts note that the CAD is experiencing limited volatility, trading at approximately 2.3333 ILS, a figure consistent with its three-month average and within a 5.4% range. However, the CAD's performance is currently hampered by stagnant oil prices, with the latest readings showing oil traded at $60.89 per barrel, approximately 3.9% below its three-month average. The fluctuation in oil prices is significant, especially considering Canada’s status as a major oil exporter, as lower oil prices generally exert downward pressure on the CAD.
Interest rate differentials also play a pivotal role in shaping the CAD's outlook. The Bank of Canada maintained its rate at 2.25%, while the U.S. Federal Reserve indicated potential cuts, creating a divergence that has contributed to CAD depreciation against the USD. Given that the U.S. market accounts for a substantial portion of Canada's exports, any shift in the economic landscape could impact the CAD's competitiveness and stability.
On the other side, the Israeli shekel (ILS) has shown remarkable strength, reaching a three-year high against the US dollar driven by anticipated U.S. interest rate cuts and favorable fiscal data. Recent upgrades to Israel's sovereign credit outlook and improving geopolitical stability following the Gaza ceasefire have bolstered investor sentiment, further supporting the ILS. Analyst reports from UBS predict that the ILS could appreciate further, projecting the USD/ILS exchange rate could reach 3.30 by mid-2024 due to diminished geopolitical risk premiums.
Market tensions between Canada and the U.S., alongside fluctuating oil prices, paint a challenging picture for the CAD moving forward. Analysts suggest that as long as oil prices remain volatile and U.S. interest rates fluctuate, the CAD may continue to struggle against a strengthening ILS unless significant domestic economic improvements are recorded. Overall, currency traders are advised to closely monitor the interplay between commodity prices, central bank policies, and global economic conditions to navigate future transactions effectively.
