The CAD is currently range-bound against the USD, influenced by various economic factors.
Key drivers include the interest rate differential: the Bank of Canada holds its policy rate at 2.25%, while expectations for Federal Reserve rate cuts may weaken the USD. Recent positive jobs data in Canada, with a drop in unemployment, supports strength in the CAD. However, a stall in oil prices, down from recent highs, places downward pressure on the loonie since Canada is a major oil exporter.
Expect CAD/USD to trade within a stable range over the next few months, given recent low volatility in the market. Upside risk could stem from stronger-than-expected Canadian retail sales, boosting CAD demand, while downside risk may arise from sustained weakness in oil prices, negatively impacting the CAD’s value.
