Canadian Dollar: Rate divergence weighs CAD against US Dollar – TD Securities

FXStreetJul 20, 2026 2:58 PM

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TD Securities strategists note that softer Canadian Consumer Price Index (CPI) is lifting USD/CAD as rate divergence remains a key driver. They argue broad US Dollar (USD) strength should limit USD/CAD downside below 1.40 and see higher Oil prices as CAD-supportive on crosses but not versus USD. Their forecast keeps USD/CAD near 1.39 through H2 2026.

Softer CPI keeps USD/CAD in a higher range

"Softer CPI report is pushing USD/CAD higher, and we took profit on our long USD/CAD put spread last Friday."

"The softer CPI report is pushing USD/CAD higher as rates divergence continues to be a big driver of the pair."

"The broad USD strength will likely curb material USD/CAD weakness below 1.40, in our view, as the bar for the Fed to hike is lower than that for the BoC."

"Higher oil prices on the back of another global supply shock could be bullish for CAD on the crosses but not against the USD."

"Our forecast has USD/CAD staying around 1.39 in H2 2026."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)

Disclaimer: The information provided on this website is for educational and informational purposes only and should not be considered financial or investment advice.

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