USD/CAD Volatility Expected to Rise from August Lows: BofA Analysis

Bank of America analysts highlight that forex volatility has been unusually subdued throughout August, particularly for the USD/CAD pair currently trading at 1.3580. Historical patterns suggest this calm period is atypical for late summer trading and unlikely to persist. The USD/CAD implied volatility has dropped to multi-month lows near 6.5%, well below the 9.2% yearly average. Analysts point to several upcoming catalysts that could spark movement, including Canadian CPI data next week and diverging central bank policies between the Fed and Bank of Canada. The BoC has already cut rates twice this year while the Fed maintained its hawkish stance until Powell's recent dovish pivot. Technical analysis shows USD/CAD compressed in a tight 1.3520-1.3620 range, with a breakout imminent. Traders should prepare for increased volatility as the pair exits this consolidation phase, with oil prices and interest rate differentials likely determining direction.