Scotiabank strategists see limited CAD recovery as US-Canada yield spreads remain unfavorable despite firmer May CPI data.
The Canadian Dollar (CAD) posted its first gain against the US Dollar (USD) in eight sessions, supported by firmer May Consumer Price Index (CPI) data and steadier US-Canada yield spreads. However, strategists doubt a sustained reversal in yield differentials, suggesting CAD underperformance will persist absent a broader USD shift.
Technical studies indicate the USD remains overbought, with the daily Relative Strength Index (RSI) at 87—higher than during previous surges to 1.47-1.48 in early 2025 and 2020. While the CAD’s minor rebound may signal a temporary pause, price action offers little evidence of a significant recovery.
A break above 1.41 could extend the USD rally toward 1.43-1.45, reinforcing the current bullish trend.