Outlook
The Canadian dollar remains sensitive to oil-price moves and intraday risk sentiment. Soft oil prices have historically weighed on the loonie, and the near-term path for CAD will hinge on energy demand signals and oil’s direction early in the week. With monetary policy in Canada remaining cautious and inflation easing toward target, CAD may struggle to gain traction unless oil stabilizes or improves. February data and central-bank communications in 2026 will add to near-term volatility, particularly if employment, inflation, or policy signals surprise to the upside or downside.
Key drivers
- Oil price dynamics continue to steer the CAD, given Canada’s status as a major oil exporter. Oil has been volatile, and further downside in energy prices would tend to pressure the loonie, while firmer oil could provide some support.
- Monetary policy divergence between Canada and its major trading partners matters. The Bank of Canada has held policy cautious, with the policy stance leaning toward data-dependence as inflation moves toward 2%.
- Trade relations and tariffs shape sentiment around Canadian exports. Developments in U.S.-Canada trade policy, including tariffs or retaliatory actions, can sway CAD through their impact on Canadian energy and commodity demand.
- Upcoming economic indicators in February 2026—employment data, inflation readings, and central-bank communications—are likely to influence CAD volatility and short-run moves.
- Global risk sentiment and U.S. economic momentum affect CAD via the U.S.–Canada link and energy demand. A stronger U.S. economy generally supports demand for Canadian goods, while downturns or protectionist shifts can weigh on the loonie.
Range
CADUSD 0.7343, 1.3% above its 3-month average of 0.7249, having traded in a quite stable 4.6% range from 0.7087 to 0.7413
CADEUR 0.6188, near its 3-month average, having traded in a stable 1.6% range from 0.6120 to 0.6217
CADGBP 0.5381, just below its 3-month average, having traded in a very stable 2.4% range from 0.5322 to 0.5451
CADJPY 112.2, just 0.8% below its 3-month average of 113.1, having traded in a quite stable 4.3% range from 110.5 to 115.3
OILUSD 67.75, 6.1% above its 3-month average of 63.83, having traded in a very volatile 19.0% range from 59.04 to 70.26
What could change it
- A sustained rebound in oil prices would tend to support the CAD, especially if energy demand improves and the oil market stabilizes.
- Any shift in BoC policy expectations—such as a surprise shift toward tighter or more dovish guidance—could recalibrate CAD, particularly if inflation data deviates from forecast.
- Resolution or escalation in U.S.–Canada trade tensions and tariffs could alter export competitiveness and CAD performance.
- Stronger-than-expected Canadian employment or inflation data could support the loonie by aligning with a more constructive domestic growth and pricing trajectory.
- A change in global risk appetite or a stronger U.S. dollar could pressure CAD through risk sentiment and cross-asset correlations.
