Outlook
The CAD remains supported by firmer oil prices and a cautious domestic policy stance. If oil sustains gains and risk appetite remains firm, the loonie could test the upper end of its range toward around 0.74–0.745 per USD in the near term. A sustained pullback in oil prices or softer domestic/inflation data could see the CAD drift back toward 0.72–0.725. China trade progress and the BoC’s hold at 2.25% suggest the mood may stay constructive but currency moves are likely to remain range-bound around the 0.72–0.74 area, with oil as the key swing factor.
Key drivers
- Oil price trajectory: Brent Crude OIL/USD at 69.09, near 90-day highs; 9.4% above its 3-month average (63.16) and a volatile 59.04–69.09 range.
- CAD against the USD: CAD/USD at 0.7340, 1.8% above its 3-month average (0.7212); traded within a stable 0.7084–0.7413 range over 3 months.
- Domestic policy: Bank of Canada held the policy rate at 2.25% on Jan 28, signaling confidence in current conditions.
- Trade developments: Canada–China deal reducing tariffs on canola and other exports, plus limited import of Chinese EVs; U.S.–Canada trade tensions ongoing as a risk factor.
- Overall risk sentiment and external demand: commodity-linked sensitivity remains a defining feature for the CAD.
Range
CAD/USD: current 0.7340; 3-month range 0.7084–0.7413; 3-month average 0.7212 (CAD stronger vs USD by about 1.8%).
CAD/EUR: current 0.6195 near 7-day highs; 3-month range 0.6120–0.6217.
CAD/GBP: current 0.5361; 3-month range 0.5322–0.5451.
CAD/JPY: current 113.6; 3-month range 108.4–114.9.
Oil (USD): current 69.09; 90-day high; 3-month range 59.04–69.09; 9.4% above 3-month average (63.16).
What could change it
- Oil price movements: sustained breaks above current highs support gains in CAD; a decisive retreat reverses this strength.
- BoC policy surprises: an unexpected rate move or a hawkish/dovish shift in stance would shift the CAD’s trajectory.
- Trade developments: further progress or setbacks in Canada–China relations; changes in U.S.–Canada trade policy.
- Global risk appetite: shifts in risk sentiment or geopolitical events affecting commodity demand.
- U.S. dollar dynamics: shifts in Fed guidance or U.S. economic data that alter USD strength/weakness could spill over to CAD.
