Policy divergence between the Federal Reserve and Bank of Canada remains the dominant driver of USD/CAD, with the Fed’s September 2026 rate hike to the 3.75–4.00% range widening the policy gap to roughly 150–175 basis points against the BoC’s steady 2.25% target. This differential, expected to reach 200 basis points by year-end, has supported the pair near 1.425 amid softer Canadian employment and GDP data plus new U.S. tariffs. Elevated oil prices above $90 per barrel provide partial CAD support, while upcoming October 28 central bank decisions and U.S. midterms represent key near-term catalysts that could shift yield spreads and trader positioning through the remainder of 2026.