Outlook
The CAD faces a delicate near-term path. A weaker-than-forecast Canadian services PMI and oil-market volatility add to near-term downside risk, but a resilient oil price backdrop and a cautious BoC stance help limit losses. With no Canadian data on tap today, price action will hinge on oil moves and broader risk sentiment, plus upcoming U.S. data and central bank communications. In markets, the loonie typically moves with oil and with policy expectations; a firm oil complex or hawkish BoC tone could keep CAD supported, while softer oil or renewed risk-off demand could weigh on it.
Key drivers
- Oil price sensitivity: WTI around 68.86 USD/bbl, about 8.7% above its 3-month average (63.37), and trading in a very volatile 17.0% range (59.04–69.09). As a commodity-linked currency, CAD reacts to oil swings even when oil sits above its recent average.
- Currency levels and recent moves: CAD/USD near 7-day lows around 0.7292 (0.9% above its 3-month average of 0.7225); CAD/EUR near 0.6191 (close to its 3-month average); CAD/GBP near 0.5393 (30-day highs); CAD/JPY around 114.3 (1.3% above its 3-month average of 112.8). These pairs have been trading within relatively narrow ranges.
- Domestic data and PMI signal: February data showed a weaker-than-forecast services PMI, contributing to near-term CAD softness, even as oil keeps the currency sensitive to macro headlines.
- Monetary policy stance: The Bank of Canada has kept a cautious stance with policy rate guidance and inflation nearer 2% in the medium term, creating a backdrop of neutral-to-soft CAD momentum unless oil or data shift decisively.
- Global backdrop: The CAD’s direction will also reflect U.S. data, Fed expectations, and global risk sentiment, given Canada’s trade exposure to the United States and its oil linkage.
Range
CAD/USD: 0.7087 - 0.7413
CAD/EUR: 0.6120 - 0.6217
CAD/GBP: 0.5322 - 0.5451
CAD/JPY: 109.3 - 114.9
What could change it
- Oil price moves: A sustained move higher or lower in oil could tilt CAD in the respective direction, given Canada’s oil export exposure.
- Fresh domestic data: Employment figures, inflation prints, and BoC communications could shift rate expectations and CAD valuation.
- U.S. data and policy: Stronger-than-expected U.S. data or a more hawkish Fed stance could support the USD and weigh on CAD; softer U.S. data could do the opposite.
- Trade and geopolitical developments: Trade tensions or policy changes affecting Canada’s exports, including energy, could alter CAD dynamics.
