Scotiabank strategists Shaun Osborne and Eric Theoret describe USD/CAD as broadly stable around 1.41, with Canadian Dollar (CAD) performance driven mainly by front‑end rate differentials despite support from stronger Oil prices. They expect the Fed to remain on hold, which could narrow spreads and ease CAD defensiveness. The Bank of Canada minutes (BoC), due later today, are expected to highlight improved growth and inflation but ongoing uncertainty, ahead of the next policy decision on September.

Rate spreads and Oil steer Canadian Dollar

"Front-end spreads are the real driver of the CAD’s broader performance, however, and wider rate differentials are what has been keeping the CAD tone defensive in recent weeks."

"The 2Y cash bond spread has widened around 50bps since early May but the spread may correct somewhat if the Fed remains on hold today as we expect."

"The minutes are likely to reflect the bank’s acknowledgement that while growth had picked up and inflation was revised higher, elevated uncertainty gave policymakers time to assess incoming data before adjusting policy."

"Neutral—The CAD’s technical situation remains little changed. USD gains through initial resistance 1.4115/25 yesterday failed to hold, leaving spot trading in a tight range around 1.41. A clear push above 1.4125 targets 1.4160."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)