Bias: Bullish-to-range-bound, as the CAD is above the 90-day average and in the upper half of the 3-month range.
Key drivers:
• Rate gap: The Bank of Canada's recent interest rate cut puts the CAD at a disadvantage compared to INR's Reserve Bank, which continues to intervene for stability.
• Risk/commodities: Oil prices are rising above average, positively affecting the CAD since Canada is a major oil exporter.
• Trade policy uncertainty: Canada is facing significant headwinds, including U.S. tariffs on exports, which may continue to weaken the CAD over time.
Range: The CAD/INR is likely to hold steady or drift within its recent range as external pressures from U.S.-Canada trade relationships impact movement.
What could change it:
• Upside risk: A significant rebound in Canadian exports or stabilization in trade relations with the U.S. could bolster the CAD.
• Downside risk: Further deterioration in employment data or increased capital outflows from Canada may exert downward pressure on the CAD.
