Recent US-Canada policy divergence has driven USD/CAD higher to around 1.425 in early October 2026, with the pair consolidating near 19-month highs after weak Canadian employment data showed a 68,300 job loss in September against expectations of gains. The Federal Reserve’s September rate hike widened the policy gap, with the Fed funds target at 3.75-4.00% versus the Bank of Canada’s 2.25% overnight rate, supporting a 130-200 basis point yield differential that favors the USD. Softer Canadian labor and growth readings have reduced near-term BoC hike odds while elevated US Treasury yields and tariff uncertainty add further support. Key upcoming catalysts include the October 28 BoC decision, US CPI releases, and midterm election outcomes that could influence trade and fiscal policy. Forecasts from major banks cluster near 1.40 by year-end amid these macro crosscurrents.