Outlook
The CAD strengthened on Friday after a surprise fall in unemployment, helping the loonie regain some ground. If oil continues to trend higher at the start of this week, the CAD could extend its momentum, given oil’s importance to Canada’s economy. The outlook remains modest due to the Bank of Canada’s cautious stance and ongoing global uncertainties. Key near-term drivers will be oil prices, U.S. demand signals, and February 2026 data releases—particularly employment and inflation—which can sustain or cap broader CAD moves.
Key drivers
- Oil prices and commodity exposure: Canada is a major oil exporter; current oil at 67.38 USD is 6.1% above its 3-month average, with a wide trading range. This sensitivity typically translates into sharp CAD moves with oil swings.
- Monetary policy divergence: BoC has maintained a cautious stance with rates around 2.75% (policy stance since mid-2025) as inflation moves toward the 2% target, influencing CAD versus other majors.
- Trade and tariffs: U.S. tariffs on Canadian goods and retaliatory measures add overhang to export momentum and CAD volatility.
- Upcoming data and central bank tone: February 2026 indicators (employment, inflation) and communications from policymakers can reprice CAD expectations.
- U.S. demand and risk sentiment: With Canada’s heavy export exposure to the U.S., a stronger U.S. economy generally supports CAD, while risk-off sentiment can weigh on it.
Range
CAD/USD 0.7322 (3-month average 0.7232; range 0.7087–0.7413)
CAD/EUR 0.6192 (near its 3-month average; range 0.6120–0.6217)
CAD/GBP 0.5382 (near its 3-month average; range 0.5322–0.5451)
CAD/JPY 115.1 (3-month average 113; range 109.9–115.3)
Brent Crude OIL/USD 67.38 (3-month average 63.5; range 59.04–69.09)
What could change it
- Oil price reversals: A sharp fall could pressure the CAD; a sustained rally would support it.
- BoC policy shifts or new inflation data: Any surprise tightening or easing would reprice CAD.
- U.S. policy and trade developments: Changes in tariffs or stronger/weaker U.S. growth could shift demand for Canadian exports.
- Domestic data surprises: Weaker-than-expected employment or inflation softness could weigh on the loonie.
