USD/CAD Market Update

USD/CAD Softens to 1.3801 – Friday, April 10, 2026

Current Level: Mid-1.38s (24hr range 1.3800–1.3844)

USD/CAD has declined 13 pips to 1.3801 this morning as markets digest a lower-than-expected US core CPI print and Canadian employment data that came in largely as expected. The muted USD reaction to this morning's inflation data reflects that it is too early to capture the full extent of secondary effects from the Iran conflict, while recent employment strength has reduced labor market concerns and diminished the impetus for the Fed to turn more dovish. With both central banks expected to hold rates steady, attention returns to risk sentiment and Iran-related headlines as ceasefire negotiations continue.

Market Overview:

Risk appetite is mixed this morning as equity markets open higher ahead of this weekend's peace talks in Islamabad. The US dollar is hitting new weekly lows following the ceasefire developments, down 1.5% this week despite mixed signals from the Middle East. The VIX fear index has dropped sharply from 30 to 20 over the past week, reflecting easing investor anxiety. Major US equity indexes have recovered to near flat for the year, while the two-year Treasury yield has fallen 12 basis points as markets reprice near-term risk. Energy prices remain mixed with WTI trading at the 98 dollar per barrel handle as markets await this weekend's peace talks.

US Inflation Data Shows Mixed Signals:

US headline inflation surged 0.9% in March, the biggest monthly jump since 2022, but this was almost entirely due to soaring gasoline prices. Core inflation rose by just 0.2% for the month, leaving the annualized print at a below-consensus pace of 2.6% versus 2.7% expected. The muted USD reaction reflects two factors: it remains too early to capture the full extent of secondary effects from the Iran conflict, and recent employment strength has reduced labor market concerns. CIBC economists note that next month's CPI report could show greater pass-through to core components, keeping the Federal Reserve on hold for another month. Should core inflation remain in line over the next couple of data sets, it would keep the door open for an FOMC rate cut later this year.

Fragile Iran Ceasefire Negotiations Continue:

Recent de-escalation efforts are keeping a firm lid on the US dollar despite mixed signals from the Middle East. Israeli Prime Minister Benjamin Netanyahu announced an agreement to begin direct talks with Lebanon, though hours later confirmed there is no ceasefire in Lebanon and Israel will continue to strike Hezbollah. This geopolitical optimism has spilled into broader market sentiment, with the combination of softer data and easing geopolitics creating an unusual market dynamic. The outlook hinges on whether the truce proves to be a durable off-ramp and if physical oil and shipping systems normalize. The fragile ceasefire remains headline-dependent, with both sides still conducting military operations and accusing each other of violations.

Canadian Data/Outlook:

Canadian employment increased by 14.1K in March versus 15.0K consensus, printing largely in line with expectations. Unfortunately, all jobs were concentrated in part-time work (+15.2K), with full-time employment contracting (-1.1K). This continues the bearish trend seen over recent months, with over 100,000 jobs lost in the previous two months, almost all in full-time work. The unemployment rate remained unchanged at 6.7%. Hourly wages jumped to a robust 5.1% versus 4.3% consensus, but economists note this was heavily influenced by last year's numbers and is expected to slow down. CIBC economists expect the Bank of Canada to keep interest rates unchanged throughout 2026 as the Canadian labor market remains relatively weak, helping keep inflationary pressures limited even with the recent oil price shock.

Fed Watch:

The Federal Reserve is expected to hold rates at 3.75% at its April 29 meeting. Markets continue to price no change in Fed policy through the first half of 2026, with only modest easing expected by year-end (roughly 9 basis points in total). The subdued response to today's CPI data likely reflects that recent employment strength has reduced labor market concerns, diminishing the impetus for the Fed to turn more dovish. Fed policymakers are balancing persistent inflation risks against the possibility that global tensions weigh on labor markets, with core PCE inflation holding at 3.0% year-over-year reinforcing concerns that price pressures remain sticky. The Fed's policy flexibility continues to narrow with growth slowing and inflation risks heightened by potential energy disruptions.

Technical Picture:

Resistance: 1.3874 (initial resistance), 1.3932 (strong resistance having rejected four consecutive rallies since January; sustained break above required to restore bullish momentum)
Support: 1.3818 (200-day moving average currently being tested), 1.3728 (February-March triple top target), 1.3620 (key level that must break to invalidate broader corrective rally)
Outlook: Yesterday's daily close below trendline support at 1.3860 ended the one-month uptrend, with prices now testing the 200-day moving average at 1.3818. A close below 1.3818 would target 1.3728. RBC has lowered its 1-3 month technical target from 1.3900 to 1.3750 following the bearish trend reversal, reflecting a shift to a neutral near-term outlook. For USD sellers, current levels around 1.3820 are still attractive to layer in hedges or cover near-term requirements.

Week Ahead:

Next week features key producer price data on Tuesday that will provide additional insight into whether inflation pressures are broadening beyond consumer-facing categories. The PPI is forecast to jump to 1.2% monthly from 0.7% previously, while core PPI is expected to hold steady at 0.5%. Bank of England Governor Bailey speaks twice, which will be closely watched for clues on UK monetary policy amid energy-driven inflation concerns. UK GDP data on Wednesday is forecast to show modest 0.1% monthly growth. Australian employment data will test labor market resilience in the context of global uncertainty. The key question for markets will be whether the fragile ceasefire removes enough inflation risk to support more dovish central bank repricing, or whether underlying price pressures continue to support restrictive policy stances.

Other Notes:

• Canada has broken ground on its inaugural nation-building infrastructure initiative in Contrecoeur, Quebec, with Prime Minister Mark Carney attending the ceremony. The port expansion project is expected to boost Montreal's capacity by approximately 60% and represents the first in a planned series of major initiatives to reduce Canada's economic dependence on the United States amid escalating trade frictions.
• Sterling has surged more than 1% versus the dollar to trade back above 1.34 on ceasefire developments. The pound's jump reflects rapid unwinding of safe-haven dollar demand, though markets may lose patience quickly if they are not met with clearer conditions attached to the ceasefire and tangible progress toward something more durable.
• The euro is riding fragile optimism and hawkish tailwinds, with EUR/USD testing flat long-term moving averages just below 1.17. Despite still-fragile truce conditions, markets appear to believe the broader trajectory is toward de-escalation, with the euro enjoying improved risk sentiment and the ECB looking comparatively hawkish versus the Fed.
• Fourth-quarter GDP was revised down to an annualized 0.5% from the prior 0.7%, highlighting how momentum faded late in 2025 despite strong signals entering 2026. Personal income unexpectedly fell 0.1% in February even as consumer spending grew at a slightly slower pace, creating crosscurrents that leave the Federal Reserve in an increasingly uncomfortable position.

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.