Executive Summary
AUD/CAD trades at 0.9601 as of March 31, 2026, sitting at the 88th percentile of its 52-week range after a remarkable 13.7% rally from the April 2025 low of 0.8442. The pair is driven by the widest RBA-BoC policy rate differential in modern history at +185bps (4.10% vs 2.25%), with the RBA actively hiking while the BoC holds at the bottom of its neutral range after nine consecutive cuts. However, the pair has pulled back sharply from its March 18 high of 0.9762, losing approximately 170 pips in two weeks as the Iran-US war's oil surge — with WTI at $103/bbl — overwhelmingly favours the petro-dollar CAD over the mining-oriented AUD. The bilateral narrative is a collision between Australia's rate supremacy and Canada's terms-of-trade windfall, with the oil shock delivering a net commodity advantage to CAD that partially offsets the carry disadvantage. Our tactical stance is mildly bearish AUD/CAD (conviction 2/5), as the oil-driven CAD strength and risk-off sentiment pressure the pair lower near term, while our strategic stance is mildly bullish (conviction 2/5), anchored by the persistent and widening rate differential that should reassert dominance once the geopolitical fog clears and oil prices normalise.