USD/CAD: Oil support but gains capped – Commerzbank

Commerzbank’s Michael Pfister argues the Canadian Dollar has started to benefit from higher Oil prices, but structural headwinds and close linkage to the US Dollar limit outperformance. A sustained Oil price above $100 could improve Canada’s real rate differential versus Europe, yet Commerzbank remains cautious on further CAD strength and keeps its USD/CAD forecast at 1.37 for H1 2026.

Energy boost versus growth and trade risks

"If oil prices settle above $100 per barrel amid a continuing war in the Middle East, the CAD is likely to benefit further."

"Conversely, this means that the real interest rate differential with many European currencies should improve significantly in such a scenario, should they hike interest rates only very hesitantly given their relatively weak real economies."

"In EUR/CAD, we might test lower levels in the event of a continued energy price shock, but this would likely be due mainly to a weaker euro and better terms of trade for the CAD."

"For USD/CAD, we continue to assume that sustainably lower levels are unlikely to be reached until the second half of the year."

"Accordingly, we remain comfortable with our USD/CAD forecast of 1.37 for the first half of the year."

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