Where we are: USD/CAD is currently trading at 1.3671, down marginally by 0.09% on the day. The pair has been confined to a tight intraday range of 1.3647-1.3689, little changed from yesterday’s close after failing to break significantly in either direction overnight.
What’s driving it: The Bank of Canada’s cautious stance is capping Loonie strength. While the central bank held rates steady at 2.75% at its last meeting on April 16th, Governor Macklem’s comments regarding tariff uncertainty and a softer growth path continue to weigh on sentiment. This morning’s Canadian GDP print at 08:30 ET is the key domestic catalyst, with forecasts pointing to a rise to 0.2% m/m, but a weaker number could reignite easing expectations, given headline CPI remains above target. The modest weakening in WTI crude to $105.37, down nearly 3%, has added additional pressure, though DXY softness offers a counterweight.
- BoC maintained an easing bias at its last meeting citing tariff uncertainty.
- Canada’s 10-year yield is down 3bp on the day, suggesting some concern about growth prospects.
- Speculative positioning is modestly short CAD, which is in the 65th percentile, offering some room for further CAD weakness if data disappoints.
NY session focus: Today’s session is all about the 08:30 ET data dump, with Canadian GDP and US Advance GDP, Core PCE, and Employment Cost Index all hitting simultaneously. Given the BoC’s data-contingent stance, the market will be sensitive to any deviation from the 0.2% GDP forecast. Watch for a break of the 1.3650 support or a push above the 1.3690 resistance. The US-CA 10Y spread at +82bp continues to favor USD strength, but any repricing lower after the data could pressure USD/CAD. The pain trade for the Loonie is a surprisingly strong Canadian GDP print coupled with a weak US GDP, which could trigger a rapid squeeze of existing CAD shorts.