Outlook
The CAD remains range-bound after a sideways session, with a stronger-than-expected retail sales print not delivering a lasting lift. The loonie could edge higher early in the week if oil prices rise on Middle East tensions, given Canada’s commodity-linked profile. Still, upside may be capped by the divergent policy paths of the U.S. Federal Reserve and the Bank of Canada, and by domestic data and trade dynamics.
Key drivers
- Oil price movements (Canada’s key export); oil at 70.88, about 10% above the 3-month average, supports the CAD when oil climbs.
- U.S.-Canada trade tensions; tariffs and protectionist moves can weigh on the CAD.
- Bank of Canada policy stance; a cautious stance or further easing would weigh on the CAD relative to the USD.
- U.S. Fed policy divergence; easier U.S. policy versus a potentially tighter or steadier BoC path can influence USD/CAD.
- Global risk sentiment and oil-market volatility; the CAD is sensitive to risk appetite and energy demand.
- Domestic data and broader global growth signals; these shape interest-rate expectations and the CAD’s yield advantage.
Range
CAD/USD at 0.7326, just 0.9% above its 3-month average of 0.7264, and within a 4.6% trading range from 0.7087 to 0.7413. CAD/EUR at 0.6192 is near its 3-month average, within 1.6% of the range from 0.6120 to 0.6217. CAD/GBP at 0.5415 is just above its 3-month average, trading in a 2.1% range from 0.5322 to 0.5434. CAD/JPY at 113.1 is near its 3-month average, within a 4.2% range from 110.7 to 115.3. Oil/USD at 70.88 is 10% above its 3-month average of 64.43, within a volatile 21.5% range from 59.04 to 71.76.
What could change it
- A sustained move higher or lower in oil prices driven by geopolitical developments or changes in global energy demand.
- Shifts in BoC policy expectations (rate changes or policy communications) relative to the Fed.
- Significant changes in U.S.-Canada trade relations or tariff policies.
- Surprises in Canadian economic data (inflation, employment, growth) altering rate-path expectations.
- Global risk sentiment shifts that influence demand for commodity-linked currencies.
