Scotiabank strategists Shaun Osborne and Eric Theoret note USD/CAD is trading near fair value around 1.4115, with the Canadian Dollar (CAD) constrained by wide short-term rate differentials versus the Dollar. Softer Oil is a mild drag, and while a Fed hold could allow some CAD gains, they do not expect meaningful improvement until rate spreads narrow later in 2026.

CAD capped by wide rate differentials

“The CAD is holding little changed against the generally stronger USD. Our fundamental fair value estimate suggests spot is trading right about where it should be in broad terms, with the equilibrium estimate edging up to 1.4086 today.”

“Softer crude oil is a mild headwind but the real constraint on the CAD still comes from wide short-term interest rate differentials relative to the USD. A Fed hold tomorrow may allow the CAD to improve a little but scope for improvement is limited absent a significant narrowing in rate differentials—which we do not expect to develop until later this year.”

“Neutral/bullish—The CAD’s technical situation is largely unchanged but spot is testing initial resistance 1.4115/25, ahead of 1.4160 and key resistance at 1.4250. Support is 1.4060.”