USD/CAD Market Update

USD/CAD Tumbles to 1.3748 – Tuesday, April 14, 2026

Current Level: Mid-1.37s (24hr range 1.3731–1.3790)

USD/CAD has declined 66 pips to 1.3748 this morning as markets continue pricing out Iran conflict risk premiums amid reports of renewed US-Iran negotiations. The pair is trading near session lows following news that Iran has countered the US demand for a 20-year uranium enrichment suspension with a five-year proposal, while officials discuss potential second-round meetings as early as this week. Domestically, the Liberal Party's sweep of all three by-elections last night gives PM Carney's government a House of Commons majority, which RBC views as medium-term CAD-positive.

Market Overview:

Risk sentiment remains constructive this morning as markets extend the de-escalation trade that has dominated the past week. The US dollar is weakening broadly against G10 currencies as the DXY index continues its decline from the pivotal 100 resistance area. Equity markets are pushing higher with the S&P 500 confirming a breakout above major resistance around 6,800 and approaching January's all-time highs. Energy prices are falling despite the ongoing US blockade of Iranian ports, with WTI crude dropping to around $94 per barrel as diplomatic momentum builds.

US-Iran Diplomatic Progress Drives De-escalation Trade:

Markets are maintaining a bullish outlook on geopolitics despite mixed signals from the Middle East. Iran has responded to weekend talks by proposing a five-year uranium enrichment suspension instead of the US-demanded 20-year timeline, which Trump rejected. However, US officials are reportedly working to schedule fresh in-person meetings with Iranian representatives following the earlier breakdown in Pakistan talks. The US military has confirmed its blockade of Iranian ports has begun, yet the focus remains on diplomatic solutions rather than escalation risks.

Global risk appetite is firm with the VIX Index around 18, its lowest level since the conflict began. Taiwan's main equity index reached a record high despite the country's heavy dependence on imported energy, signaling investor confidence in a broader peace arrangement. The political incentives for resolution are clear, as stabilizing oil prices and moving toward diplomatic solutions support domestic priorities amid persistent inflation sensitivity. Markets are forward-looking and clearly prefer the diplomacy path, though optimism needs confirmation through visible normalization of oil shipments.

Liberal By-election Sweep Delivers Carney Majority:

The Liberal Party won all three by-elections held yesterday, giving PM Carney's government a majority in the House of Commons for the first time since taking office. RBC strategists view this as medium-term CAD-positive, as it provides greater policy certainty and reduces the risk of early elections. The majority government should enable Carney to pursue his economic agenda more effectively, including infrastructure spending and trade diversification initiatives away from US dependence.

The political stability comes at a critical time as Canada navigates trade uncertainty with the USMCA review looming. A stronger parliamentary position may help Canada negotiate from a position of greater domestic unity, though the fundamental challenges around US trade relations and tariff risks remain unchanged. The by-election results suggest Canadian voters are giving Carney's government more time to address economic challenges, though polling indicates concerns about cost of living and housing affordability persist.

March PPI Data Shows Mixed Inflation Signals:

US March PPI surprised softer than expected, but underlying dynamics suggest delayed rather than avoided inflation pressures. Wholesalers are absorbing rising input costs rather than passing them through to retailers, as evidenced by consecutive monthly declines in trade services margins. This indicates tariff passthrough to consumer prices is being delayed, with transportation and warehousing costs remaining elevated. Once wholesalers can no longer absorb the margin squeeze, higher costs are likely to flow through to CPI readings.

Canadian Data/Outlook:

No major Canadian economic data was released today. The Bank of Canada is expected to maintain its overnight rate at 2.25 percent at the April 29 meeting, with RBC forecasting no changes through 2026. The central bank continues to emphasize looking through temporary energy-driven inflation spikes while monitoring for broader price pressures. Recent labor market data showed mixed signals with employment rising 14.1K in March but concentrated entirely in part-time positions, while the unemployment rate held at 6.7 percent and wage growth jumped to 5.1 percent year-over-year.

Fed Watch:

The Federal Reserve is expected to hold rates at 3.75 percent at its April 29 meeting, with RBC forecasting no changes through 2026. Markets currently assign 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. Core PCE remains at 3.0 percent year-over-year, well above the Fed's 2 percent target.

Technical Picture:

Resistance: 1.3799 (key resistance level), 1.3856 (secondary resistance)
Support: 1.3728 (Feb-Mar triple top target), 1.3625 (trendline support)
Outlook: Yesterday's close below the 200-day MA at 1.3819 and support at 1.3799 amplifies last Thursday's bearish reversal below 1.3860. Downside focus shifts to the February-March triple top at 1.3728, with a close below the trendline at 1.3625 potentially terminating the corrective rally in place since late January. RBC's 1-3 month target at 1.3750 has been reached.

Week Ahead:

This week features key central bank commentary and growth data that will test whether de-escalation momentum can be sustained. BOE Governor Bailey speaks Wednesday amid expectations for modest UK GDP growth of 0.1 percent monthly. Australian employment data will provide insight into labor market resilience in the Asia-Pacific region. 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. US retail sales data on Tuesday will test consumer spending resilience amid elevated energy costs.

Other Notes:

• The euro has continued its quiet comeback, with EUR/USD exploring the 1.17 area more confidently above the 200-day moving average near 1.1670. Markets are pricing a 36 percent chance of an ECB hike as early as this month, reflecting perceptions that the ECB is readier than the Fed to tighten further amid energy-driven inflation concerns.
• Sterling has jumped back to pre-war highs above 1.35 as oil prices erased most of their weekly gains and risk appetite improved. For the UK as a net energy importer, the conflict had imposed a clear terms of trade drag, but the prospect of peace flips that dynamic by reducing stagflationary pressures.
• The Canadian dollar's fundamental undervaluation persists when anchored to US-Canada 10-year real yield differentials and oil prices. The raw math suggests CAD should be trading closer to 1.35 based on fundamentals, but policy uncertainty and lingering tariff premiums continue to weigh on the currency.
• China's BYD is planning to open 20 dealerships across Canada through local partners following Canada's decision to lift prohibitive tariffs on Chinese EVs and establish an annual import quota of 49,000 vehicles. This signals evolving Canada-China trade dynamics that could influence longer-term currency flows.

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.