USD/CAD Market Update

Current Level: Mid-1.36s (24hr range 1.3636–1.3689)

USD/CAD is trading at 1.3645 this morning, roughly 40 pips firmer for the loonie versus Wednesday's 1.3685 close. The pair tested the 1.3636 low intraday before stabilising in the mid-1.36s, with the dollar broadly weaker against the G10 basket as traders process Super Thursday: four central-bank decisions, US Q1 GDP, Core PCE, Canadian GDP, and a continued risk-on bid in equities. The reversal from the 1.3711 high printed Wednesday post-FOMC marks the second-largest single-day USD move of the week and pulls the pair back below the 1.3650 trendline that defined last week's defense.

Market Overview:

Risk appetite is constructive this morning. Equity markets opened higher on the back of strong corporate earnings from the mega-cap technology names that reported overnight, with the dollar index reversing some of Wednesday's post-FOMC gains. Global bond yields are lower across the curve, with the US 30-year note notably falling back below the 5.00% handle. WTI crude is trading near the $105 per barrel mark, with Brent flirting with the $115 level, as shipping through the Strait of Hormuz remains at an effective standstill and the United States maintains its naval blockade of Iranian shipping. The combination of a softer USD, lower yields, and a sustained energy bid has produced a modest pro-cyclical tone that supports commodity-linked currencies, including the Canadian dollar.

Risk-On Reversal as USD Retreats from Two-Week Highs:

Today's price action is best framed as a tactical unwind of the hawkish-Fed bid that lifted USD/CAD into the 1.3711 area Wednesday afternoon. The catalyst is twofold. First, US Q1 GDP missed expectations, printing at 2.0% annualised versus the 2.2% market consensus, with private domestic demand running at 2.5% but consumer spending visibly slowing. Second, the BoE and ECB both held rates this morning with cautious commentary that lowered the bar for further rate-hike pricing in those currencies, supporting EUR and GBP against the USD. The narrow 8-1 BoE vote, the ECB's confirmation of a deposit rate at 2.0%, and the slower-than-expected US growth print have collectively walked back some of the dollar premium that built up on Wednesday's three-dissent FOMC.

Canadian Data/Outlook:

Canadian GDP rose 0.2% month-over-month in February as expected, up from 0.1% in January, with manufacturing leading the gain on a rebound in auto production. Per CIBC, the Canadian economy is now tracking roughly 1.7% annualised growth in Q1, modestly above the Bank of Canada's official MPR projection of 1.5%. The flash estimate for March, however, came in flat, suggesting momentum has stalled into Q2. CIBC's economists read the combination as keeping the Bank of Canada on the sidelines for the remainder of 2026, consistent with Wednesday's hawkish hold. CIBC's Central Bank Watch now prices an 8% probability of a hike at the June 10 meeting and 0% probability of a cut, framing the next move as more likely up than down should oil-driven inflation persist into Q3.

Fed Watch:

The Federal Reserve's preferred inflation measure offered no relief in this morning's data. Core PCE rose 0.3% month-over-month in March, in line with consensus but consistent with the elevated year-over-year run rate that has been the dominant theme since the Iran conflict began. The Employment Cost Index for Q1 came in firmer than expected at 0.9% versus 0.8% consensus, reinforcing the picture of sticky services inflation and tight labour costs. Coupled with Wednesday's three-dissent FOMC and the broader hawkish tilt in committee composition, the data argue for a higher-for-longer policy stance. Markets now price approximately a 10% probability of a cut at the December 17 meeting, down from roughly 15% pre-FOMC, with consensus increasingly aligning around a hold through year-end. CIBC's Central Bank Watch shows 0% / 0% for hike or cut at the June 17 meeting.

Technical Picture:

Resistance: 1.3700 first, then 1.3728 (Wednesday's post-FOMC high zone) and 1.3799 above.
Support: 1.3596 first (Monday's low cluster), then 1.3526 (April low) and 1.3500 below as the CIBC Q2 target.
Outlook: The break back below 1.3650 puts the burden of proof on the dollar bulls, and a close below 1.3636 today would open the path to a retest of 1.3596. CIBC's strategists remain sellers of any near-term rallies and hold their 1.3500 Q2 target intact.

Week Ahead:

Next week's calendar pivots from central banks back to data, with Friday's joint US and Canadian employment release the headline event for USD/CAD. A firmer-than-expected NFP print would extend the hawkish-Fed thesis and likely retest the 1.3700 to 1.3728 resistance band; conversely, a soft print combined with a steady Canadian read would reinforce the sell-rallies bias and open the 1.3596 support level.

Other Notes:

• Energy: WTI near $105 per barrel, Brent near $115 per barrel. The Strait of Hormuz remains effectively closed and the United States naval blockade is now described by President Trump as indefinite. Energy inventories are drawing rapidly.
• JPY: The Ministry of Finance confirmed FX intervention overnight, validating the 160 to 162 USD/JPY zone as the Bank of Japan's defended line. CIBC views this as confirmation that further USD/JPY upside is limited.
• US rates: The 30-year Treasury yield has fallen back below the 5.00% handle on the softer GDP read, partially offsetting the firmer Core PCE and ECI data and contributing to today's USD softness.