Where we are: USDCAD is currently trading around 1.3715, trading within a tight overnight range. This sits slightly above Friday’s close, but below the recent highs around 1.3750. The pair remains sensitive to both oil price fluctuations and US dollar strength.
What’s driving it: The Bank of Canada’s dovish stance, coupled with recent disappointing domestic data, continues to weigh on the Canadian dollar. Macklem’s comments after the April 16th meeting, highlighting tariff uncertainty and a softer growth path, keep the prospect of future rate cuts alive. While recent GDP data surprised to the upside (2.6% MoM in March), last month’s weaker employment figures, underscored by an unexpected 17K job loss and a rising unemployment rate to 6.9%, are still fresh in investors’ minds, increasing bets on a potential BoC easing. Any strength in the loonie is largely being driven by external factors currently, as opposed to anything domestic.
- The Bank of Canada’s dovish stance and openness to easing, reinforced by Governor Macklem’s recent commentary.
- CAD weakness is partially fuelled by soft labor data and growing market consensus that the BoC will prioritize growth over inflation.
- Speculative positioning shows a modestly short CAD position, with -14,659 contracts. A large shift w/w shows an increased bias to that short side.
NY session focus: The primary focus for today’s NY session will be the 08:30 ET US CPI release. Stronger-than-expected US inflation data could lead to further USD strength, potentially pushing USDCAD towards 1.3750 and potentially beyond. Conversely, a softer print could provide a temporary reprieve for the Loonie. Also of note is the 11:59 ET Fed Chair Nomination Vote. Watch 1.3680 as intraday support. The pain trade for USDCAD would be a weak US CPI print alongside a hawkish surprise from the Fed, squeezing USD longs and CAD shorts simultaneously.