USD: Earnings and retail data boost markets
Markets are pointing to a green open today, supported by solid corporate earnings and retail sales that beat expectations. Consumers showed notable resilience in March, with headline spending coming in much stronger than surveys had projected across the board.
That said, the monthly gain was heavily influenced by a sharp 15.5% jump in gas station sales, as the Iran conflict pushed fuel prices to their highest levels since 2022. Stripping out gas, retail sales still rose a respectable 0.6%. Overall, the data adds modest momentum to broader markets and is keeping risk assets mildy bid.
This improved economic backdrop feeds directly into the debate around future monetary policy. The US dollar edged slightly higher but remains soft overall and has not kept pace with the rebound in oil prices, signaling limited conviction behind the move. Treasuries slipped as traders look ahead to Kevin Warsh’s Senate confirmation hearing, with investors watching closely for any clues on the path toward potential rate cuts. Still, while the hearing would normally be a focal point, it is unlikely to draw much attention from markets until there is greater clarity on developments with Iran.
That uncertainty is keeping attention firmly on the Middle East. Trump has signaled he is unlikely to extend the current two‑week ceasefire, a stance that continues to unsettle global oil markets. Traders are watching whether an Iranian delegation will participate in peace talks in Pakistan ahead of Wednesday’s critical deadline. While the US Vice President has expressed willingness to negotiate, renewed military action remains a clear risk if talks break down. Tehran, for its part, has rejected negotiating under the threat of force, leaving the outlook for Middle East oil flows highly uncertain.
Adding to the unease, prediction markets assign only a 15% chance of a breakthrough by tomorrow, rising to 38% by month‑end. There is also just a 38% probability that Iran agrees to end uranium enrichment by the end of the month, underscoring how fragile expectations remain. Until there is tangible progress, geopolitical risk is likely to continue overshadowing domestic policy developments and keep markets highly sensitive to headlines.
CAD: Canada business mood meets inflation
If you only looked at the Bank of Canada’s Q1 2026 Business Outlook Survey, you’d think confidence was back on track. The survey (run Feb. 5–25) showed sentiment improving to around pre–trade conflict levels, with firms expecting better sales and showing stronger plans to invest and hire. Recession fears also eased sharply, as the share of firms budgeting for a downturn fell from 22% to 9%, the lowest since the question began in 2023.
But the BoC also flagged an important caveat: most of that optimism was captured before the war in the Middle East began. In follow‑up calls with firms most exposed to the shock (March 18–27), many reported higher or rising costs tied to fuel, freight, fertilizers, and supply chains, even if their sales and hiring plans were not yet materially changed. That sets up a simple question for today: are those cost pressures now showing up in the data?
March CPI suggests they are, at least through energy. Headline inflation rose to 2.4% year over year (up from 1.8% in February), and StatCan pointed to higher energy prices, especially gasoline, linked to the conflict. At the same time, inflation excluding gasoline cooled to 2.2% year over year, and the final base‑year effects from the GST/HST break also helped damp the annual comparison. Shoppers still feel it in some aisles, though, with fresh vegetable prices up 7.8% year over year and food purchased from stores up 4.4%.
The bottom line is that this still looks more like an energy shock than a broad re‑acceleration in underlying inflation. The Bank of Canada’s core measures are sitting near target, with CPI‑trim at 2.2% and CPI‑median at 2.3% in March. If that holds, markets can stay relatively calm, but the next test is whether higher fuel and freight costs start bleeding into a wider set of prices and expectations.
Despite the noticeable jump in headline inflation, the markets still expect the BoC to stay on hold at least until October. As such, USD/CAD’s reaction has been largely muted, gravitating and finding support in the 1.365 level. This week, the currency’s trajectory depends heavily on global risk sentiment and geopolitical developments, as the ceasefire deadline looms. If diplomatic efforts succeed and the broader US Dollar softens, the loonie is well-positioned to continue testing the 1.365 level and closer to the 1.36. Otherwise, a cautious pause around 1.37 seems highly plausible.
EUR: Trading a delicate calm
Markets continue to trade on a thread of fragile optimism, with the euro holding up against the dollar and hovering just south of the 1.18 level. Meanwhile, the currency has recently underperformed against oil‑exporting peers such as the NOK and CAD. The commodity‑FX complex benefited from crude prices being jerked higher following the weekend’s geopolitical setbacks. At the same time, muted but still constructive risk sentiment allowed terms‑of‑trade dynamics to reassert themselves more cleanly.
The bearish move in EUR/CHF over the past couple of days has also been instructive. Rather than reflecting a classic flight‑to‑safety dynamic, it appears more consistent with a re‑engagement with pre‑conflict trends, given that the franc had been disproportionately weakened against the euro since the conflict began.
EUR/USD remains below, but has so far held firm against, the 1.18 level. President Trump confirmed that the ceasefire is set to expire tomorrow evening, Washington time, while talks are due to resume today in Pakistan. A test of 1.18 would appear warranted only in the event of a formal peace‑deal announcement that includes the reopening of the Strait.
In the meantime, today’s key focus is Kevin Warsh’s testimony before the Senate Banking Committee. Markets will be alert to any dovish, Trump‑aligned rhetoric. A stance perceived as overly accommodating to pressure for rate cuts could reintroduce a risk premium into dollar pricing – particularly at a time when uncertainty around inflation risks remains elevated due to the conflict.
On the data front, we will keep an eye on the April ZEW surveys for Germany and the euro area, due for release this morning at 10:00 BST, as the conflict begins to weigh on what had initially been an uplift in sentiment at the start of 2026 – already challenged by an unconvincing macro data cadence.
Market snapshot
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Calendar: April 20-24
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*The FX rates published are provided by Convera’s Market Insights team for research purposes only. The rates have a unique source and may not align to any live exchange rates quoted on other sites. They are not an indication of actual buy/sell rates, or a financial offer.
