USD/CAD Outlook:
Slightly weaker, but likely to move sideways, as the rate is below its recent average and showing no clear driving force.
Key drivers:
• Rate gap: The Federal Reserve has held interest rates steady, contrasting with the Bank of Canada maintaining its cautious stance, which weighs on USD performance.
• Risk/commodities: The CAD has faced pressure from fluctuating oil prices, as the recent rise in oil has not been enough to significantly support the currency amidst weak domestic data.
• Macro factor: Recent Canadian economic data indicates stagnation, with flatlined growth limiting the CAD's strength in the exchange rate.
Range:
The USD/CAD is likely to drift within its recent range, as external influences and lack of strong domestic catalysts keep it from testing extremes.
What could change it:
• Upside risk: A surprising rise in U.S. employment data could strengthen the USD.
• Downside risk: If oil prices fall substantially, the CAD could weaken further, putting downward pressure on the exchange rate.
