Today's expected range for the Canadian Dollar against the major currencies:
US Dollar 1.3860-1.4110
Euro 1.5990-1.6240
Sterling 1.8540-1.8790
WTI Oil (opening level) $90.82
The CAD/USD is opening at 1.3988 ( 0.7149 )
CAD was unreactive to the Bank of Canada rate announcement and policy statement, which brought no new guidance of note as the key USDCAD exchange rate hovers near the top of the range of the last several months.
The divergence between the Federal Reserve- which remains focused on elevated inflation- and the Bank of Canada- which is increasingly concerned about economic growth- continues to provide fundamental support for USD/CAD.
Investors now await upcoming US Producer Price Index (PPI) data and any new developments regarding Iran to assess the pair’s near-term direction.
Headlines
· The US launched a second day of strikes on Iran, raising fears that peace efforts could collapse and the conflict could drag on. Trump accused Tehran of stalling on an interim deal, while Iran vowed to stand firm. Earlier, the US carried out “self-defense strikes” after an American helicopter was downed, and Iran hit US facilities in Bahrain, Jordan, and Kuwait in response.
· US annual inflation rose to 4.2% in May 2026, the highest since April 2023 and third straight increase, driven by a 23.5% jump in energy costs amid the Iran conflict. Gasoline rose 40.5% and fuel oil 58.9%. Monthly CPI was up 0.5%, with energy over 60% of the gain. Core inflation reached 2.9% year-on-year as expected, while month-on-month core CPI slowed to 0.2%, the only number that surprised versus expectations, which were for a +0.3% rise.
· The Bank of Canada kept its key overnight rate at 2.25% for a fifth straight meeting in June 2026, as expected, and left the Bank Rate and deposit rate at 2.5% and 2.20%. It sees limited spillover from higher energy prices, expects inflation near 3% before easing toward 2%, and notes weak economic activity and ongoing US trade policy uncertainty.
· The European Central Bank look set to raise interest rates for the first time since 2023 due the energy-related rise in inflation. The deposit rate is expected to be lifted by a quarter point to 2.25%, with new quarterly forecasts likely to suggest inflation will quicken further. The ECB's decision must balance the need to address rising inflation with the risk of sparking a recession, as economic expansion is already sagging.
· Bank of Japan Governor Kazuo Ueda was hospitalized Wednesday for treatment of an issue that will see him miss next Monday-Tuesday’s Bank of Japan meeting, though officials said he would likely make a statement in conjunction with the meeting. The market is pricing more than 90% likelihood that the BoJ will hike the policy rate 25 basis points to 1.00%, which would be the first hike since December of last year and bring the rate to its highest level since 1995.
Key Points
· Equities: US tech sold off sharply, Europe was mixed, and Asia extended losses as oil and geopolitical risk rose.
· Volatility: CPI, US-Iran tensions, oil above $94, VIX 22, ECB, PPI, downside skew
· Digital Assets: Bitcoin above $62.5k, Ethereum rebound, Fed focus
· Commodities: Gold nears USD 4,000 amid continued liquidation; oil edges higher after US strikes in Iran
· Fixed Income: Treasuries hover in a range as US May CPI was in line with expectations.
· Currencies: USD frozen in the local range since its recent break higher, may be taking its lead from US treasury yields.