Where we are: USD/CAD is currently trading at 1.3613, modestly lower on the day. The pair has been contained within a tight intraday range of 1.3578-1.3622, failing to meaningfully break either side. This level is roughly in line with yesterday’s NY close, suggesting a period of consolidation after recent volatility.
What’s driving it: The primary driver is the sharp decline in WTI crude, currently down over 7% to $95.21, wiping out much of the gains from earlier this month. This commodity price shock is significantly impacting the CAD, given its strong correlation. The BoC’s recent hold at 2.75% with an easing bias is providing little support amid the oil rout, as the market reassesses the impact of lower crude prices on future inflation and growth expectations. While the 2Y CA yield has ticked up 3bp to 2.922%, this is being overshadowed by the commodity move and the broader risk-off sentiment.
- WTI Crude: Down 7.16% on the day, trading at $95.21.
- Canada 2Y Yield: Up 3bp to 2.922%.
- BoC Stance: Easing bias remains, but increasingly data-contingent.
NY session focus: Watch for the 08:15 ET release of the US ADP Non-Farm Employment Change and 10:00 ET Canadian Ivey PMI, but the key event will be BOC Gov Macklem Speaks at 16:15 ET — markets will be hypersensitive to any remarks regarding the oil price impact. Technically, a break below 1.3578 could trigger further CAD weakness. The 1.3650 area represents initial resistance. The US 10Y at 4.353% is providing a supporting bid for USD. The pain trade here is a sudden rebound in oil prices catching CAD shorts off guard, squeezing the pair back towards 1.3700.