CAD Range Holds Against USD with Fed and BoC in Focus

Scotiabank strategists Shaun Osborne and Eric Theoret are analyzing the Canadian Dollar's (CAD) performance against the US Dollar (USD). They describe USD/CAD as broadly stable around 1.41, driven mainly by front-end rate differentials rather than support from stronger Oil prices.

The experts expect the Federal Reserve to remain on hold, which could narrow spreads and ease CAD defensiveness. The Bank of Canada minutes are due later today, likely highlighting improved growth and inflation but ongoing uncertainty ahead of the next policy decision in September.

According to Osborne and Theoret, front-end rate differentials have been keeping the CAD tone defensive in recent weeks, with the 2Y cash bond spread widening around 50bps since early May. However, they anticipate a correction if the Fed remains on hold today as expected.