CAD Holds Ground as USD Range Continues

The Canadian Dollar has been trading in a tight range against the USD, hovering around 1.41, according to Scotiabank strategists Shaun Osborne and Eric Theoret.

They attribute this stability to front-end rate differentials, which have driven the CAD's performance despite support from stronger oil prices.

The pair expects the Fed to remain on hold, which could narrow spreads and ease CAD defensiveness. This is reflected in the 2Y cash bond spread, which has widened by around 50bps since early May but may correct if the Fed remains on hold today as expected.

The Bank of Canada minutes due later today are likely to highlight improved growth and inflation, although ongoing uncertainty will be noted ahead of the next policy decision in September.