Widening interest-rate differentials between the Federal Reserve and Bank of Canada remain the dominant driver of USD/CAD positioning, with the Fed’s target range at 3.75–4.00% versus the BoC’s unchanged 2.25% policy rate. Softer Canadian labor data, including unexpected job losses, and resilient U.S. payrolls have reinforced expectations for a sustained rate gap, pushing the pair above 1.42 in early October 2026. Elevated oil prices provide partial support for the loonie, while ongoing U.S.-Canada trade tensions and geopolitical risks add volatility. Key catalysts ahead include the October 28 BoC and FOMC decisions, plus upcoming CPI and employment releases that could shift market-implied odds on further policy divergence.