USD/CAD Market Update

USD/CAD Slides to 1.3710 – Thursday, April 16, 2026

Current Level: Low-1.37s (24hr range 1.3713–1.3739)

USD/CAD has declined 38 pips to 1.3710 this morning as continued risk-on dynamics with elevated commodity prices create what CIBC describes as "the perfect storm for a stronger Loonie." The pair is trading at multi-week lows as diplomatic momentum between the US and Iran supports broader risk appetite, while positive Canadian economic data from February shows manufacturing and wholesale trade rebounding strongly from January's weakness.

Market Overview:

Risk sentiment remains constructive this morning with equity markets continuing to roar higher and beaten-down software stocks catching a long overdue bid. The S&P 500 has gained a jaw-dropping 11% since the March 30 lows, adding approximately US$6 trillion in market capitalization over the 12-day period. The US dollar is slightly higher versus the G10 basket overall, though showing weakness against commodity currencies like the Canadian dollar. Global bond yields are lower with no major moves worth reporting, while precious metals remain mixed with gold stuck at the US$4800-4850 resistance area.

Diplomatic Progress Sustains Risk Appetite:

Markets continue to focus on diplomatic channels as Pakistan actively mediates to extend the US-Iran ceasefire, aiming for a longer truce to allow more time for peace negotiations. The fate of Iran's nuclear program remains the main sticking point, with Iran maintaining its program is peaceful while the US and its allies want it decommissioned. Despite the ongoing geopolitical uncertainty, risk assets continue to advance with the S&P 500 closing at new all-time highs during yesterday's session. The second round of peace talks continues to be the next catalyst for markets to monitor.

Canadian Dollar Benefits from Broad-Based Strength:

The Canadian dollar has gained roughly 1.3% against the US dollar since the recent ceasefire agreement was confirmed, reflecting what sources describe as the fading of the US dollar's "risk policy" premium. Canada saw a positive economic rebound in February following a sluggish start to the year, with manufacturing sales climbing 3.6% to reach $71.2 billion and wholesale trade excluding petroleum rising 2.0% to hit $86.8 billion. The motor vehicle sector led this resurgence, with transportation equipment manufacturing soaring 18.8% as supply chain issues eased and assembly plants ramped up operations after winter maintenance.

Business operations are showing encouraging signs of balance moving forward. Wholesale inventories dropped slightly to lower the inventory-to-sales ratio, meaning goods are moving faster off the shelves. Manufacturing unfilled orders hit a record high of $117.6 billion due to strong aerospace demand, suggesting Canadian factories will stay busy in the months ahead. When geopolitical fears cool off, the Canadian dollar is positioned to move closer to its medium-term fair value.

Dollar Weakness Reflects Fading Risk Premium:

Rising risk sentiment has stalled the dollar rally as the US dollar index has stayed soft following confirmation of the ceasefire. Since last Tuesday, the greenback has given back nearly all its March gains, suggesting the conflict premium is fading rapidly. Positioning is shifting out of safe havens and back into growth-heavy sectors and emerging markets as diplomatic channels reopen and gather momentum. FX volatility has eased across both emerging markets and the G10, with the Brazilian real breaking below the R$5 level for the first time since March 2024 and the Mexican peso maintaining its outperformance among emerging market currencies.

Canadian Data/Outlook:

Canadian manufacturing sales rose 3.6% in February to $71.2 billion, rebounding from January's decline though slightly missing market forecasts. Wholesale trade excluding petroleum gained 2.0% to $86.8 billion, also coming in below broader expectations but welcomed by markets. The motor vehicle sector drove the recovery with transportation equipment manufacturing jumping 18.8% as supply chain issues eased. Ontario and Quebec led provincial gains from renewed industrial activity. The Bank of Canada is expected to maintain its overnight rate at current levels, continuing to emphasize looking through temporary energy-driven inflation spikes while monitoring for broader price pressures.

Fed Watch:

The Federal Reserve is expected to hold rates at 3.75% at its April 29 meeting, with markets currently assigning minimal probability to rate cuts this year as elevated energy prices and persistent core inflation readings support a restrictive policy stance. The de-escalation in Middle East tensions removes some upside risk to inflation, but Fed officials will likely want to see sustained evidence of lower oil prices and contained inflation expectations before considering policy easing. The underlying US macro-outlook and how it absorbs any fading conflict-driven drag will remain the more pressing focus for markets, helping to keep dollar downside contained should the US growth engine continue to show resilience.

Technical Picture:

Resistance: 1.3750 (CIBC upper range target), 1.3800 (secondary resistance)
Support: 1.3710 (current levels), 1.3500 (CIBC year-end target)
Outlook: USD/CAD is trading in the low-1.37s as continued risk-on dynamics with elevated commodity prices create the perfect storm for a stronger Canadian dollar. CIBC strategists expect very rangebound price action for the remainder of the week, believing current levels are attractive for USD sellers. The pair has dropped notably from recent highs near 1.3878 as de-escalation hopes and rising risk sentiment take hold of broader markets.

Week Ahead:

Next week brings critical Canadian inflation data on Monday, which will be closely watched for signs that energy price pressures are feeding through to core measures. The Bank of Canada's trimmed and median CPI readings will provide insight into underlying inflation trends. US retail sales data on Tuesday will test consumer spending resilience amid elevated energy costs, while UK CPI data will show how energy-driven inflation is impacting the British economy. These releases will be key for determining whether central banks can maintain their current policy stances or need to adjust to changing inflation dynamics.

Other Notes:

• The euro has extended gains for multiple consecutive sessions, with EUR/USD exploring levels near 1.18 as markets price in reduced geopolitical risk premiums. The ECB appears relatively hawkish compared to the Fed, with the level acting as key resistance since the pair's post-conflict price action.
• Sterling received a modest lift following a stronger-than-expected UK GDP print, with February GDP rising 0.5% monthly versus 0.1% consensus. The data reflects pre-war conditions and highlights that underlying momentum in the UK economy was firmer than appreciated ahead of the Middle East escalation.
• Gold appears to be in a corrective trend that started in January, with prices making lower highs and lower lows while stuck at the US$4800-4850 resistance area. Bulls must prove themselves over the next few weeks, with a break above the downward trend channel critical for the metal to resume its uptrend.
• Optimism around potential US-Iran peace talks has added lift to emerging market currencies broadly, with the Brazilian real holding up well versus the dollar and breaking below the R$5 level for the first time since March 2024. Still-elevated local rates and supportive terms-of-trade dynamics are providing practical relief by improving the inflation outlook.

This commentary is provided for informational purposes only and should not be construed as investment, legal, or tax advice. Past performance is not indicative of future results. Please consult with qualified professionals before making any financial decisions. Vantry Capital Inc.