USD/CAD Market Update

Current Level: Low-1.41s (24hr range 1.4146 to 1.4199)

USD/CAD is trading at 1.4162 this morning, down 25 points from Thursday's 1.4187 close, after a 1.4146 to 1.4199 range. The low is the weakest level for the pair this month and the first trade below 1.4150 since late September. The driver is a single event: Warsh used his IMF appearance to repeat that he will not provide forward guidance, markets treated that as the last opportunity to set up an October hike, and the US dollar is now lower against the entire G10 basket.

Market Overview:

Risk sentiment remains cautious but is stabilising, per CIBC, with equity markets mixed after a week dominated by the selloff in AI-related names, hot US inflation data and a sharp rally in bonds. Treasury yields are moving back up this morning, with the 10 year higher by 4bps as Thursday's flight to safety loses steam, although the 10 year is still on track for its largest weekly decline since February 2026. CIBC describes the US dollar as weaker against the full G10 basket and at its lowest level this month. For hedgers the relevant observation is that the week's move has been dollar-led. CAD has captured less of it than its peers, so the pair is lower without CAD actually outperforming, and that asymmetry is what makes Monday's domestic print matter.

October Hike Priced Out After Warsh Declines to Guide:

Warsh spoke at the IMF meetings in Bangkok and offered no guidance on near-term policy, per CIBC, which markets viewed as the last real opportunity for the Federal Reserve to tee up an October move. He has avoided forward guidance since taking office in May, and the FOMC meets on October 27 and 28. Markets responded by pricing the October meeting out, which is what pushed the dollar to its lowest level of the month. CIBC's read is that the underlying tension has not gone away: the Fed still has an inflation problem, and this is a repricing of timing rather than of direction. Hedgers should treat the move as positioning-driven. Nothing in the data this week argued for a softer Fed.

AI Credit Stress Is the Week's Defining Story:

The Nasdaq 100 has fallen roughly 3% this week, its worst week since July, as investors question whether the debt-funded AI buildout can generate sustainable returns, per CIBC. CoreWeave remains at the centre of it. CIBC reports its bonds trading at crisis levels, with credit default swaps pricing a greater than 60% probability of bankruptcy within five years. Independent reporting this week put the yield on the company's 9.625% notes maturing in 2032 at about 15.06%, up from roughly 13.42% at the start of October. The debate is not one-sided. Nvidia CEO Jensen Huang has expressed confidence in CoreWeave, and both Deutsche Bank and Cantor Fitzgerald have described the selloff as a buying opportunity. CIBC's framing is that stress of this kind tends to show up in credit first and that the next couple of months will settle whether this is a shakeout or something larger. The FX consequence is already visible: commodity currencies are on the back foot even while the dollar itself weakens, which is the mechanism keeping CAD behind its peers.

Canadian Data/Outlook:

There is no Canadian data today, so CAD is again trading as the passenger. September CPI lands Monday at 8:30am ET, nine days ahead of the Bank of Canada decision, and it is the release that sets the near-term CAD path. Consensus on our calendar is for headline prices to rise 0.2% m/m, with the Bank of Canada median measure unchanged at 2.0% y/y and the trimmed measure unchanged at 1.9% y/y. Continuum Economics looks for the core measures to slow slightly from there, with median at 1.9% and trim at 1.8%. A core print that holds near target would widen the divergence between US and Canadian inflation and keep rate differentials tilted against CAD, while an upside surprise in the core measures would put a December Bank of Canada hike back into the conversation. The backdrop going in is soft: September employment fell 68,300 and the unemployment rate rose to 6.5%. CIBC's central bank watch prices a 25bp Bank of Canada hike on October 28 at 31%, down from 38% on Tuesday, with the probability of a cut at 0%.

Fed Watch:

CIBC's central bank watch puts a 25bp Federal Reserve hike at the October 28 meeting at 15%, with a cut at 0%. That is down from 28% yesterday and 53% on Tuesday, the fastest unwind of Fed hike pricing we have seen this month, and it is a function of Warsh declining to guide rather than of any softening in the data. September producer prices were the hottest in more than four years and core PPI ran at 5.0% y/y, the firmest since early 2023. CIBC's position is that the inflation problem has not been resolved and that this week's repricing is about when the Fed moves, not whether it still needs to.

Technical Picture:

Resistance: 1.4199 is today's high and the level that capped the overnight bounce. Above it, 1.4242 is Thursday's high and the first genuine test of the week's downtrend.
Support: 1.4146 is today's low and the weakest print of October. Below that, 1.4137 is the September 28 low, with 1.4100 the next round figure.
Outlook: The pair spent the first half of October between roughly 1.4150 and 1.4300 and has now closed below the bottom of that band for the first time. CIBC's short-term directional signal has moved off its maximum long reading, a setup the bank says has historically preceded a move lower about 60% of the time, although it would wait until after the October 28 Federal Reserve and Bank of Canada decisions before positioning for it. For CAD-based buyers of US dollars these are the best levels of the month; for sellers, Monday's CPI is the nearer risk.

Week Ahead:

Monday's CPI is the only domestic input before the Bank of Canada decision, and the October 28 meetings fall on the same day for both central banks. That concentrates the risk into one session: two decisions the market currently expects to be holds, priced at 31% and 15% respectively, with nine days of data between here and there. Clients carrying October and November exposures should note that the pair's current level already reflects the market discounting both meetings as non-events.

Other Notes:

• Oil remains the inflation input that will not cooperate. CIBC has WTI trading above US$97/bbl this morning, with the supply outlook unchanged. Elevated energy prices cushion Canada's terms of trade while continuing to feed the US inflation problem.
• Treasuries are handing back part of Thursday's rally, with the 10 year up 4bps per CIBC, but the week as a whole still produced the largest decline in the 10 year yield since February 2026. Investors bought bonds despite hot inflation and oil near US$100/bbl, which says more about risk appetite than about the inflation outlook.
• CIBC notes that the recent dip has reset valuations in parts of the technology complex to multi-year lows. Whether that is a buying opportunity or an early warning is the question the next two months will answer.