We inspect the drivers of CAD and show that while it has conventionally been considered an Oil currency, the importance of that factor has declined over time. In fact, risk sentiment and the broad USD are much more relevant for USD/CAD.

Canada has heavy trade and economic links to the US and has outperformed non-USD peers on the US exceptionalism trade. We see this reversing into next year as the US catches down to the rest of the world. In terms of domestic vulnerabilities, upcoming mortgage renewals will keep a lid on household consumption. However, Canada will have tailwinds from two offsetting factors, namely population growth and excess savings.

We expect CAD to appreciate into next year on our broad USD outlook, but it is unlikely to be the G10 outperformer. We think CAD should lag on crosses, especially ones linked to the improving China outlook like AUD.