CAD: Holding on to recent gains
Global markets continue to take their cues from President Trump, with risk sentiment holding up better than expected despite ongoing Middle East tensions and energy-related concerns. Markets appear willing, for now, to grant his calls for patience some runway, helping to sustain a constructive tone that has lifted equities globally. At home, while the prospect of stalled diplomatic efforts has nudged oil prices and Treasury yields higher, markets split their attention into Fed Chair nominee Kevin Warsh’s hearing, who struck a balanced note by reaffirming the Fed’s independence while outlining pragmatic fresh thinking on inflation management and central bank communication, developments that have left the dollar modestly firmer.
This week in Canada, the inflation report did little to shift the near-term policy narrative, a reason the CAD has been able to hold onto its recent gains. Despite the noticeable jump in headline CPI, markets continue to price the Bank of Canada on hold through at least October, so the data didn’t trigger a meaningful repricing in rates, or a fresh impulse in FX.
Instead, the Canadian Dollar’s near-term tone is being set externally. Trading has been dominated by developments in the US–Iran conflict, with USD safe-haven demand ebbing and flowing around headlines. In that environment, USD/CAD has remained anchored, gravitating toward and repeatedly finding support around 1.365, reflecting a market that is reluctant to press USD strength while the Strait closure uncertainty remains unresolved.
That support, however, comes with a risk asymmetry: CAD stays resilient while escalation risk is contained and the broader US Dollar conflict premium continues to unwind, but it remains vulnerable to a renewed USD bid if diplomacy stalls for an extended period. For now, markets are in a wait-and-watch mode. Until there is clearer, tangible progress, geopolitical risk is likely to keep overshadowing domestic policy developments and leave USD/CAD highly sensitive to headline swings.
If diplomatic efforts gain traction and the broader USD pullback persists, USD/CAD is well-positioned to keep testing 1.365 and potentially drift toward 1.36. If the ceasefire extension comes with no diplomatic action, a cautious rebound toward 1.37 looks plausible as defensive USD demand reasserts itself.
EUR: Rangebound trading persists
The euro slipped 0.4% against the US dollar on Tuesday, retreating from resistance near 1.1790 as a combination of weaker Eurozone data, firmer US releases, and higher oil prices tilted the balance back toward (modest) USD support. While the pullback was measured, it reinforced the broader theme that has defined EUR trading since late March: recovery without conviction.
The immediate catalyst was a sharp deterioration in ZEW economic sentiment. German investor expectations fell to their lowest level in more than three years, with both expectations and current conditions undershooting already downbeat forecasts. The Eurozone aggregate reading also weakened materially, underscoring how the Iran war is feeding directly into Europe’s confidence channel. Concerns around long‑term energy supply security, softer investment intentions, and reduced effectiveness of fiscal support are once again weighing on the outlook, a reminder of Europe’s structural sensitivity to energy‑driven shocks.
At the same time, the dollar found support from strong US retail sales but mostly a renewed rise in oil prices, which helped arrest the steady erosion of USD war premium seen earlier this month. Rate dynamics also argue against extrapolating near‑term dollar weakness too far. While divergent policy paths could still lift EUR/USD above 1.20 later this year (ECB hikes and Fed cuts priced in), current yield spreads suggest much of the dollar’s adjustment is already behind us. With the Fed the most dovishly priced G10 central bank, scope for further aggressive USD repricing appears limited without a broader global rates reset.
Technically, EUR/USD remains in sideways consolidation. The broader uptrend from the late‑March lows is intact, but momentum has stalled ahead of 1.18. The RSI hovering around neutral levels reflects an absence of strong directional bias.
In short, the euro remains supported, but not emboldened. Middle East developments continue to generate sharp swings in energy markets, yet FX is increasingly trading the uncertainty itself. Until there is clearer resolution, either toward durable de‑escalation or renewed escalation, EUR/USD is likely to stay range‑bound, resilient on dips but capped on rallies.
MXN: Peso slides as Dollar finds fresh support
The Mexican peso has been on the back foot this week. The USD/MXN has climbed from the low 17.10s on April 17 to above 17.41, settling now closer to 17.3, driven largely by a renewed bout of geopolitical unease that’s keeping the Dollar firm.
The greenback caught a fresh bid despite the indefinite ceasefire extension. Reports that Secretary Vance’s Islamabad trip has been postponed suggest stalled diplomatic efforts, fueling uncertainty. This tension has also lifted oil prices, compounding the pressure on emerging-market currencies like the peso.
At the same time, domestic headlines aren’t helping. Reuters reports that US Trade Representative Jamieson Greer recently met with senior Mexican auto and steel executives ahead of the USMCA review, delivering a stark message on trade policy. One industry source summed it up bluntly: “Tariffs are here to stay… We will never go back to a zero-tariff world.”
For Mexico, that stance is a clear setback. With over half of its auto and steel exports destined for the US, persistent tariffs threaten competitiveness and growth. As the July 1 USMCA review deadline approaches with little sign of relief, markets are increasingly reflecting the strain on Mexico’s industrial outlook.
Market snapshot
Table: Currency trends, trading ranges & technical indicators
Key global risk events
Calendar: April 20-24
All times are in EST
Have a question? [email protected]
*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.
