Where we are: USD/CAD is currently trading at 1.3825, up 0.17% on the day. Intraday, we’ve seen a range of 1.3790 to 1.3839. The pair continues to struggle to break decisively above the 1.3800 handle, and is trending towards the upper end of its recent range, with prior NY close around 1.3801.
What’s driving it: The Canadian dollar is facing headwinds from the Bank of Canada’s dovish stance, despite recent positive macro prints. While the central bank held rates steady at 2.75% at its last meeting, Governor Macklem cited tariff uncertainty and a softer growth path, keeping easing on the table; this dovish backdrop is pressuring the Loonie even as oil prices trend higher. The 102bp spread between US and Canadian 10-year yields further supports USD/CAD.
- The Bank of Canada’s easing bias is still alive, but increasingly data-contingent; this is evident in Macklem’s recent remarks.
- Speculative positioning remains modestly short CAD (-68,882 contracts), but has decreased significantly from the previous week (-37,651 w/w), indicating a potential shift in sentiment.
- Despite WTI crude climbing to 89.79, the Loonie has not benefited significantly, suggesting domestic drivers are overriding the commodity link.
NY session focus: The main focus for the NY session will be the 10:00 ET ISM Manufacturing PMI and Prices data. A stronger-than-expected print could fuel further USD strength and push USD/CAD towards the 1.3850 level; conversely, a weaker print may see the pair test support around 1.3775. Later, traders will also be looking for any market-moving commentary from 20:30 ET FOMC Member Powell Speaks. The pain trade for the Loonie would be a hawkish repricing of the BoC, forcing shorts to cover.