USD/CAD Market Update

USD/CAD Firms to 1.3814 – Monday, April 13, 2026

Current Level: Low-1.38s (24hr range 1.3822–1.3877)

USD/CAD has gained 13 pips to 1.3814 this morning following the collapse of weekend peace talks between the US and Iran in Islamabad. The talks broke down over disagreements on nuclear enrichment and proxy funding issues, with Iran calling US blockade threats an "act of piracy" and warning of retaliation against Persian Gulf ports. Despite the escalation, market reaction has been more muted than usual as investors increasingly price in continued conflict and focus on this week's economic data releases.

Market Overview:

Risk appetite is fragile this morning as equity markets open slightly lower following the failed diplomatic efforts. The US dollar is showing modest strength against the G10 basket as safe-haven demand persists, though the reaction has been more contained than in previous escalation episodes. Oil prices have jumped back above $100 per barrel as energy markets reprice supply disruption risks. Bond yields are higher globally as traders slowly adjust to a higher-for-longer scenario amid persistent geopolitical tensions.

US-Iran Talks Collapse Amid Nuclear Disagreements:

Weekend peace talks in Islamabad ended without progress as the two sides remained far apart on key issues. Iran's 10-point peace plan includes demands for war reparations and permission to continue uranium enrichment, both considered unacceptable by US negotiators. The US has announced plans to blockade Tehran-linked vessels in the Strait of Hormuz, prompting Iran to warn of targeting all Persian Gulf ports if its shipping hubs are threatened. Despite the setback, CIBC strategists note that markets are responding less dramatically than in previous escalation cycles, suggesting investors are becoming conditioned to ongoing tensions. A second round of talks may be scheduled in coming days, though the fundamental disagreements appear substantial.

Energy Markets Resume Upward Pressure:

WTI crude has retaken the $100 per barrel level following the diplomatic breakdown, though the increase has been more measured than previous spikes. Approximately eight ships reportedly passed through the Strait of Hormuz on Sunday, up from five the prior weekend, suggesting some improvement in transit flows despite ongoing tensions. However, the US blockade threat and Iranian warnings of retaliation continue to support elevated risk premiums in energy markets. The renewed oil price strength adds to inflation concerns as central banks navigate the balance between supporting growth and containing price pressures.

Canadian Data/Outlook:

No major Canadian economic data is scheduled for release this week, leaving the Canadian dollar to take cues from broader macro developments and oil price movements. The Bank of Canada is expected to maintain its overnight rate at current levels as policymakers assess the impact of elevated energy costs on both inflation and economic growth. Recent labor market data showed mixed signals, with employment rising 14.1K in March but concentrated entirely in part-time positions while full-time employment declined. The unemployment rate held steady at 6.7 percent, though wage growth jumped to 5.1 percent year-over-year, the strongest pace since mid-2024.

Fed Watch:

The Federal Reserve is expected to hold rates steady at its upcoming meeting as policymakers weigh persistent inflation risks against potential growth headwinds from geopolitical tensions. Markets currently assign minimal probability to rate cuts in 2026, with elevated energy prices reinforcing the case for maintaining restrictive policy. This week's producer price data will be closely watched for signs of broadening inflation pressures, with PPI forecast to jump to 1.2 percent monthly from 0.7 percent previously. Core PPI is expected to hold steady at 0.5 percent, though any upside surprise could further reduce expectations for policy easing.

Technical Picture:

Resistance: 1.3870 (near-term resistance from CIBC analysis), 1.3900 (psychological level)
Support: 1.3800 (initial support), 1.3750 (medium-term target level from CIBC)
Outlook: USD/CAD is trading in the low-1.38s as the pair remains relatively unchanged despite the diplomatic setback. CIBC strategists believe near-term escalation threats may push the pair toward 1.3870, though they would use such levels as opportunities to establish USD selling positions given their medium to longer-term outlook for lower levels. The pair continues to trade within established ranges as markets balance geopolitical risk premiums against underlying economic fundamentals.

Week Ahead:

This week features key US producer price data on Tuesday that will provide insight into whether inflation pressures are broadening beyond consumer-facing categories. The PPI is forecast to jump significantly to 1.2 percent monthly, while core PPI is expected to remain steady. Bank of England Governor Bailey speaks twice this week, which will be closely monitored for commentary on energy-driven inflation risks. UK GDP data on Wednesday is forecast to show modest monthly growth of 0.1 percent. Australian employment figures will test labor market resilience amid global uncertainty. The focus remains on whether geopolitical tensions continue to support restrictive monetary policy stances across major central banks.

Other Notes:

• The euro has shown resilience despite renewed Middle East tensions, with EUR/USD maintaining levels near 1.17. Markets appear to be trading more on signs of potential peace rather than escalation, though the currency remains vulnerable to sustained energy price increases that would disproportionately impact European growth.
• Sterling has pulled back from recent highs above 1.34 as the diplomatic setback reduces near-term optimism about conflict resolution. The pound remains sensitive to energy price movements given the UK's exposure to imported energy costs and their impact on inflation dynamics.
• Commodity markets beyond energy are showing mixed performance, with gold maintaining elevated levels near recent highs as safe-haven demand persists. Industrial metals are under pressure as growth concerns outweigh supply disruption risks in the near term.
• Canadian housing market data continues to show weakness, with Toronto home prices declining to five-year lows and transaction volumes remaining well below historical averages. The combination of elevated mortgage rates and economic uncertainty is weighing on real estate activity across major metropolitan areas.

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.