CAD/USD Outlook:
Slightly positive, but likely to move sideways, with the rate above its recent average without a clear driver.
Key drivers:
• Rate gap: The Bank of Canada has maintained a cautious monetary policy, which contrasts with the U.S. Federal Reserve holding rates steady amid a tight labor market.
• Risk/commodities: Oil prices remain volatile, and the CAD typically follows these trends; rising oil prices can support the CAD, but recent downturns have pressured it.
• One macro factor: Canada's economy showed no growth in November, limiting the CAD's upward movement in a challenging environment.
Range:
Expect CAD/USD to hold within its recent trading range as factors may balance each other out.
What could change it:
• Upside risk: A significant rebound in oil prices could boost the CAD and strengthen its position.
• Downside risk: Continued weakness in Canadian economic indicators, particularly in the services sector, could pressure the CAD further.
