CAD Limited by Wide Rate Differentials: Scotiabank

Scotiabank strategists Shaun Osborne and Eric Theoret are cautioning that the Canadian Dollar (CAD) is unlikely to see significant gains against the US Dollar. They note that USD/CAD is trading near its fair value of around $1.4115, with the CAD constrained by wide short-term interest rate differentials versus the USD.

The strategists also point out that softer oil prices are having a mild drag on the CAD. While they suggest that a Federal Reserve hold could allow for some minor gains, they do not expect meaningful improvement until rate spreads narrow later in 2026.