Where we are: USD/CAD is currently trading around 1.3685, consolidating after a choppy overnight session. The pair remains above the 1.3650 level which has acted as key support recently, but struggles to break above 1.3700. This morning’s range has been relatively tight, and it sits just below yesterday’s NY close.
What’s driving it: The Canadian dollar remains vulnerable, primarily due to the Bank of Canada’s cautious stance and recent soft economic data. The BoC held rates steady at 2.75% at its April meeting, with Macklem citing tariff uncertainty and a softer growth path, reinforcing the prospect of future easing. This contrasts with a potentially more hawkish Fed. WTI crude oil is trading around $109.76, providing some support, but not enough to offset domestic headwinds and broad USD strength. Weaker-than-expected Canadian employment figures from last month have reinforced bets that the BoC will remain dovish, further weighing on the Loonie.
- The BoC’s easing bias remains data-contingent, particularly sensitive to domestic demand and inflation.
- Canada CPI YoY printed 7.1% last month, only slightly higher than the previous print of 7.0%, failing to ignite hawkish repricing.
- Speculator positioning remains modestly short CAD, which reduces the likelihood of a near-term squeeze to the upside.
NY session focus: The main event for today will be the US PPI data at 08:30 ET, with core PPI expected at 0.3% m/m. A higher-than-expected print could further bolster the USD, pushing USD/CAD higher towards 1.3750 and potentially 1.3800. Conversely, a soft print could see a temporary pullback towards 1.3650. Later, keep an eye on the Fed Chair Nomination Vote at 14:30 ET, but it’s likely to be a non-event, given the forecast of passage. The trade that’s working is fading CAD strength on oil rallies. The pain trade for USD/CAD is a sharp hawkish pivot from the BoC, prompted by a surprise surge in inflation.