USD/CAD Market Update

Current Level: Low-1.40s (24hr range 1.4027 to 1.4080)

USD/CAD is trading near 1.4036 this morning, down from Tuesday's close of 1.4064 after an overnight test of 1.4080 was rejected. A broadly softer US dollar is outweighing the drag on the Canadian dollar from crude prices that remain well below last week's levels. The economic calendar is quiet until Friday, when Canadian and US employment reports land simultaneously.

Market Overview:

Risk appetite is stronger this morning. CIBC reports the S&P 500 and Dow Jones opening at fresh all-time highs as the record run continues, with market breadth improving beneath the surface. Global bond yields are mixed ahead of today's US Treasury Quarterly Refunding Announcement, which should clarify future debt issuance plans. The US dollar is broadly softer against the G10 basket, trading near a six-week low per Reuters, though the Canadian dollar is capturing less of the move than its peers while oil holds near its post-selloff lows.

Hormuz Reopening: A Deal as Early as Today:

The diplomatic track is accelerating. President Trump said a deal to reopen the Strait of Hormuz could come as early as Wednesday, according to NBC News, as Iran and Oman narrow in on an arrangement that would route inbound ships through Iranian-controlled waters and outbound traffic through an Omani-controlled corridor. No agreement has been finalized. Iranian officials have pushed back publicly, and CIBC notes their position remains conditional on a change in US behaviour. Trump has described this as Iran's last chance and warned of a strong response if Tehran backs out again, per The Hill. Energy markets are treating the progress as credible: WTI crude is holding near US$76 per barrel, per Trading Economics, stabilizing after two sessions of heavy selling. CIBC observes that markets have cycled repeatedly between deal optimism and breakdown this summer, and for now traders appear willing to look through the conflicting statements and position for de-escalation.

Records Up Top, a SpaceX Unlock Below:

Equity markets are higher, with investors refocused on earnings and the AI theme. The notable exception is SpaceX, which delivered its first earnings report as a public company: results topped expectations but failed to impress, and CIBC reports the stock down 12% this morning, leaving it roughly 30% below its IPO open and more than half below its post-listing peak. Adding to the pressure, about US$100 billion of insider stock unlocks tomorrow, more than doubling the available float and creating a near-term supply overhang; today's decline alone has erased roughly US$200 billion of market value. CIBC's broader read remains constructive, with improving breadth suggesting the rally rests on more than a handful of names.

Yen Holds Near 157 as Intervention Effects Fade:

The yen is trading near 157.6 per dollar, according to Reuters, giving back much of the ground gained after the weekend's coordinated purchases by Tokyo and Washington. The currency had strengthened to about 155.2 on Monday, and it remains well above the 40-year low near 164 touched in late July, but Nikkei Asia reports markets are increasingly focused on the limits of intervention. The base case among investors is that official buying slows the pace of yen depreciation rather than reversing it, since it does nothing to close interest rate differentials. Traders remain alert to the possibility of further action.

Canadian Data/Outlook:

The domestic calendar is quiet today. The focus is Friday's July employment report, with consensus near a 15,000 job gain and the unemployment rate steady at 6.5%; CIBC economists have flagged a softer print near 8,000 as possible if temporary summer hiring unwinds. The Bank of Canada has held its policy rate at 2.25% for six consecutive announcements, and CIBC's central bank watch shows just a 2% implied probability of a hike at the September 2 meeting, with no cut priced. Tuesday's data showed the merchandise trade surplus widening to $3.9 billion in June, a four-year high, on record exports, according to Statistics Canada.

Fed Watch:

The next decision lands September 16. CIBC's central bank watch puts the implied probability of a quarter point hike at that meeting at 57%, with no cut priced, down from 62% yesterday and from roughly 82% immediately after last month's statement. Pricing has drifted lower as inflation data cools and as a potential Hormuz agreement promises relief on energy prices. Friday's July payrolls report is the first major test: consensus looks for a rebound to 88,000 jobs after June's weak 57,000 print, with the unemployment rate steady at 4.2% and average hourly earnings up 0.3% on the month. An in-line result would likely leave September pricing broadly intact, while a large surprise in either direction could reopen the debate.

Technical Picture:

Resistance: 1.4080, the overnight high, which has now capped the pair in two consecutive sessions; above that, 1.4100, the top of the range CIBC expects to hold this week.
Support: 1.4027, this morning's low; below that, 1.4000, the psychological floor the pair defended repeatedly last week and the bottom of CIBC's expected weekly range.
Outlook: CIBC notes USD/CAD is finding support above its 50-day exponential moving average, a posture their strategists describe as leaning bullish, though they want fundamental confirmation before another impulsive move. Their base case keeps the pair between 1.4000 and 1.4100 into Friday's jobs reports, and their year-end forecast still points lower, toward 1.3700, on a softer US dollar story.

Week Ahead:

Friday is the pivot point, with the Canadian and US employment reports landing simultaneously at 5:30am PT and consensus risks described by CIBC as balanced on both. Beyond that, next Wednesday's US CPI is the key input for September Fed pricing, which has been unusually sensitive to each data point since last month's meeting.

Other Notes:

• The New Zealand dollar is the G10 laggard this morning after the unemployment rate rose to a new cycle high, per CIBC.
• The ISM services index for July lands at 7:00am PT today, the only notable US release ahead of Friday's jobs data.