The USD to CAD exchange rate has shown some stability, currently at 1.3669, only 0.8% beneath its three-month average of 1.378. It has remained within a narrow range of 3.7%, bouncing between 1.3571 and 1.4078. The recent trend towards a strengthening USD has been bolstered by reduced expectations of interest rate cuts from the Federal Reserve and positive sentiment regarding potential new trade deals from the U.S. administration. Analysts note that while safe-haven flows play a significant role in supporting the dollar, disappointment in the scope of impending trade agreements could introduce volatility.
Conversely, the Canadian dollar has faced pressure, recently hampered by slow progress in U.S.-Canada trade negotiations. Concerns about the Canadian economy are exacerbated by reports of potentially contracting manufacturing activity, as indicated by the latest Ivey PMI data, which analysts suggest may weigh on the loonie. The CAD is deeply tied to commodity prices, particularly oil, as Canada is a major oil exporter. Current oil prices have surged to $70.15, representing a 4.8% increase over the three-month average of $66.91, amid a volatile trading range of 31.1% from $60.14 to $78.85. Elevated oil prices generally provide support for the CAD, so continued fluctuations could impact its performance against the USD.
Overall, the outlook for USD/CAD will likely be influenced by ongoing trade developments, Federal Reserve policies, and oil market dynamics. The interconnected nature of these factors means traders should stay informed about economic indicators and geopolitical events that may impact exchange rates in the near term.