Today's expected range for the Canadian Dollar against the major currencies:
US Dollar 1.3850-1.3730
Euro 1.5910-1.6160
Sterling 1.8380-1.8630
WTI Oil (opening level) $101.43
The CAD/USD is opening at 1.3698 ( 0.7300 )
USD is practically flat against CAD, hovering at a short distance from the four-week high, at 1.3724. The strong US consumer inflation figures released on Tuesday, and the rally on US Treasury yields are supporting the USD while the high Oil prices keep the CAD from falling further.
US Consumer Prices Index (CPI) data from April confirmed the inflationary impact of the Middle East conflict as the yearly rate accelerated to its highest level in nearly three years, at 3.8%, beating expectations of a 3.7% reading, and well above the 3.3% reading seen in March. The core CPI also beat expectations, with a 2.8% growth in the last 12 months from 2.6% in March.
These figures prompted investors to abandon any hope of further Federal Reserve monetary easing in the foreseeable future, while expectations for a rate hike grow. The CME Group’s Fed Watch Tool reflects a 30% chance of a quarter-point monetary tightening before December this year, up from 15% one week ago. This is fuelling the rally in US Treasury yields, which are right below 2026 highs, and buoying the USD.
CAD on the other hand, is drawing support from the high Oil prices amid the stalemate in the US-Iran peace process.
In the calendar on Wednesday, the main event will be the US Producer Price Index for April, which is also expected to show a significant acceleration. The focus, however, will remain on Trump's visit to China, where he is expected to discuss Iran’s conflict, Taiwan’s status, and rare earths trade, among other topics, with his Chinese counterpart, Xi Jinping.
Headlines
· US headline inflation rose to 3.8% YoY in Apr 2026 (vs 3.3%, above 3.7% forecast), driven by the oil shock. Energy surged 17.9%, led by gasoline (+28.4%) and fuel oil (+54.3%). Shelter (3.3%) and food (2.3%) also firmed. On a monthly basis, CPI increased 0.6% (down from 0.9% in March). Core inflation rose to 2.8% YoY (vs 2.6%, above forecast), with 0.4% MoM growth. Real wages declined for the first time in three years, while the US is issuing over $35.5bn in tariff refunds after a court ruled the policy unlawful.
· The US is issuing over $35.5bn in tariff refunds after a court ruled the policy unlawful.
· Japan’s current account surplus rose to a record JPY 4,681.5 billion in March 2026 from JPY 3,625.3 billion a year earlier, beating expectations. The goods surplus increased to JPY 830.5 billion as export growth of 11.7% outpaced imports at 10.0%, and the primary income surplus also widened. The secondary income deficit narrowed, while the services deficit widened sharply to JPY 257.8 billion.
· The US recorded a $215 billion budget surplus in April 2026, down from $258.4 billion a year earlier and below expectations. Spending rose to $622.3 billion, led by Social Security, interest payments, Medicare, and defense, while receipts fell to $837.3 billion, mainly from income taxes. The fiscal year deficit has reached $954 billion so far this fiscal year.
Key Points
· Equities: US slipped on hotter inflation, Europe weakened on risk-off sentiment, Asia traded mixed as chip pressure offset Japan’s resilience
· Volatility: VIX lower; inflation, oil and geopolitics remain in focus
· Digital Assets: Bitcoin near USD 81k, ETF outflows continue
· Fixed Income: US Treasury yields pushing on cycle highs. Japan’s government bonds under pressure.
· Currencies: US dollar firms slightly, sterling choppy on political focus
· Commodities: Wheat jumps limit up on lower U.S. production outlook, oil stays elevated, gold and silver rebound strongly