USD/CAD Outlook: Slightly weaker, but likely to move sideways, consistent with being below its recent average and near recent lows. Key drivers:
• Rate gap: The Federal Reserve is expected to consider rate cuts while the Bank of Canada has recently lowered its rates, maintaining a cautious stance.
• Risk/commodities: Oil prices have been volatile and are currently above their average, but recent declines may weigh on the Canadian dollar as it is dependent on oil revenues.
• One macro factor: Recent trade policy uncertainty, particularly tariffs imposed by the U.S. on Canadian exports, continues to pressure the CAD.
Range: Movement is likely to drift within the recent range, as prices are stable but lack a clear upward momentum.
What could change it:
• Upside risk: A stronger-than-expected U.S. labor market report could bolster the USD and drive up rates.
• Downside risk: A sustained decline in oil prices could increase pressure on the CAD, pushing USD/CAD higher.
