We see the CAD strengthening further against the USD in the run-up to the 25 October Bank of Canada (BoC) meeting.

The dominance of US-Canada rate differentials, driven by higher US rates, can explain why the CAD did not capitalise on the Oil price surge in August. However, if rate differentials become less of a dominant factor for USD/CAD, the determination of Organization of the Petroleum Exporting Countries (OPEC) and its allies (known as ‘OPEC+’) to support Oil prices could see the CAD strengthening over the next few weeks.