Economists at HSBC expect the CAD to strengthen further against the USD over the near term.

CAD could capitalise on high Oil prices

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