USD/CAD Market Update

Current Level: High-1.38s (24hr range 1.3864 to 1.3931)

USD/CAD is trading near 1.3868, down 60 pips from Thursday's close of 1.3928, after falling as low as 1.3864 inside a 1.3864 to 1.3931 range. July US retail sales fell 0.6% against consensus for a 0.1% gain, and CIBC reports the US dollar weaker against every G10 currency in response. The 1.3900 area that repelled two downside attempts earlier this week has given way, and the pair now sits at multi-month lows.

Market Overview:

Risk appetite is holding up despite the soft data. CIBC reports equities opening marginally higher, with the S&P 500 up 14% year to date after closing at a record 7,798.99 on Thursday and clearing 7,800 intraday for the first time, per CNBC. Treasury yields are mixed rather than lower. The 10 year yield rose 2 basis points to 4.661%, the 2 year sits near 4.152% and the 30 year is at 5.237%, according to TheStreet. CIBC notes that weaker data has failed to spark a sustained bid in Treasuries, with this week's 30 year auction clearing at the highest yields since 2001, and reads that as a bond market focused on the fiscal picture rather than the incoming data. The US dollar is absorbing the full adjustment, weaker across the entire G10 basket.

Retail Sales Show the US Consumer Cooling:

July retail and food services sales fell 0.6% on the month against consensus for a 0.1% gain, the steepest decline since May 2025, according to Census Bureau data reported by Yahoo Finance. The weakness sat in the discretionary categories. Nonstore retailers fell 2.2%, auto dealers declined 1.8%, and CIBC reports the control group that feeds directly into GDP fell 0.4%. Clothing stores rose 1.9% and food services gained 0.5%, per CNN. CIBC cautions that some of the drop may reflect demand pulled forward into June by the earlier Prime Day event, but reads the report as clear evidence the consumer is beginning to cool, and says that after this week's soft CPI and PPI prints it all but solidifies a September Fed hold. A second soft consumer reading arrived later in the morning. The University of Michigan's preliminary August sentiment index fell to 51.0 from July's final 55.2, below consensus near 54, per Trading Economics. The question CIBC poses is whether this is a summer spending pause or the start of a more meaningful slowdown as excess savings continue to erode.

Tariff Deadline Five Days Out:

Section 338 tariffs of an additional 50% take effect at 12:01 a.m. Eastern on August 19, covering roughly US$20 billion of Canadian exports across 554 tariff lines, with no exemptions for CUSMA compliant goods. The signals turned more constructive this week. Trade Minister Dominic LeBlanc met US Trade Representative Jamieson Greer on Thursday for the second time this week and the fourth time in three weeks, per Global News. CBC reports the two sides are mapping out a joint proposal to put in front of the President at least a day before the deadline, and a Canadian government source said talks are progressing well and that Washington also wants an agreement before August 19, according to Reuters. The sticking point is scope. CBC reports the Americans are refusing any deal that does not retain at least some tariffs on steel, aluminum, automobiles and softwood lumber. This remains the dominant two way risk for the Canadian dollar over the next week, and it is capable of overriding anything on the data calendar.

Canadian Data/Outlook:

There are no Canadian releases today. The next domestic input is July CPI on Monday, August 17, where the previous readings were 1.9% on the median measure and 1.8% on the trimmed measure, with headline prices down 0.4% on the month in June. The Bank of Canada has held its policy rate at 2.25% for six consecutive announcements, and CIBC's Central Bank Watch puts the implied probability of a 25 basis point hike at the September 2 meeting at 2%, unchanged from Thursday, with no cut priced. The difference from the last two sessions is that the Canadian dollar is finally capturing the US dollar's weakness. Crude is steady rather than falling, so the offset that cancelled Wednesday's and Thursday's moves is absent and the currency is taking the full benefit of the US repricing.

Fed Watch:

The next decision lands September 16. CIBC's Central Bank Watch puts the implied probability of a 25 basis point hike at 31%, down from 34% on Thursday, with no cut priced. Kalshi pricing after the retail sales report puts the hike probability near 29%. That is roughly half of where pricing stood in the days after the July decision, per CNBC. CIBC notes traders are no longer pricing a hike until January 2027, a measure of how quickly tightening expectations have faded, and says attention now shifts to Jackson Hole. The symposium is confirmed for August 27 to 29 at Jackson Lake Lodge, per the Kansas City Fed. Before that, the FOMC minutes land on August 19, though the August employment report in early September remains the release with the most capacity to move this pricing.

Technical Picture:

Resistance: 1.3900, the former 200 day EMA level that broke this morning and now becomes the first zone sellers defend. Above that, 1.3931, today's high, then 1.3967, the August 10 high.
Support: 1.3864, today's low and a multi-month low for the pair. Below that, 1.3850, where CIBC places the 200 day moving average, then the 1.3800 round number.
Outlook: This break looks different from Wednesday's. That attempt traded to 1.3907 without any expansion in range and was fully reclaimed the same session. Today's move spans 67 pips against 28 on Thursday, cleared 1.3900 decisively, and the pair is holding near the low rather than bouncing. CIBC strategists continue to target 1.3700 by year end and now say the pair may get there sooner than expected, with the 200 day moving average at 1.3850 the next reference. The immediate risk to the move is the tariff deadline, where a breakdown in talks would reprice the Canadian dollar lower regardless of what the US data says.

Week Ahead:

Monday's Canadian CPI is the first domestic release of consequence since the July employment report, and it lands with the Bank of Canada priced for nothing in either direction. August 19 remains the heaviest date in the window, carrying the tariff deadline and the FOMC minutes in the same session. The back half of the window belongs to Jackson Hole, which gives the Fed its next scheduled opportunity to frame the September decision.

Other Notes:

• WTI crude is near US$81.27 per barrel, roughly flat on the session after Thursday's decline, per Trading Economics. The International Energy Agency now sees global inventories drawing at twice the previously estimated rate this quarter on continued disruption around the Strait of Hormuz, so the softness reflects demand concerns rather than any easing of the supply picture.
• Gold is trading near US$4,371 per ounce, off Thursday's US$4,401 per Fortune, while holding a gain of more than 10% on the month, per CNBC. CIBC flags the metal at a significant technical juncture against major downtrend resistance, with the underlying bid coming from softer US data weighing on the dollar.