Oil risk, Yen intervention, and April’s risk rally
Brent and WTI have faded early dips and bounced to start the week, as traders remain unconvinced that an escort‑and‑coordination framework proposed by President Trump can quickly restore normal flows through the Strait of Hormuz. President Trump’s “Project Freedom” aims to guide neutral ships out of the Gulf, with US Central Command describing support that includes guided‑missile destroyers, aircraft, unmanned platforms, and roughly 15,000 service members. Still, with mine risk, attack risk, and war‑risk insurance constraints lingering, the route remains difficult to “normalize” quickly. Should Brent climb back above the $110 area, it could trigger again some nervousness across markets.
At the same time, equities have been in a world of their own, capping a remarkable April. The month delivered a powerful risk rally, with the S&P 500 up about 10.4% to a record 7,209, the Nasdaq up about 15.3%, and the Dow up about 7.1%. Investors largely treated the energy shock as noisy and temporary, and they were willing to pay up for growth and earnings visibility even while the oil tape stayed volatile.
That “markets moved on” vibe has shown up in correlation, too. The Implied Correlation Index has fallen sharply from its late‑March spike (peak near 41.68 on 03/27/26) to about 12.13 recently, which fits with a market that’s no longer pricing a single, macro‑driven liquidation. As I mentioned here, “It often feels like the stock market operates in an alternate universe… It’s less an alternate universe than an alternate timeline.” Markets are looking through the headline risk, have priced in the war impact, and don’t see the conflict surviving beyond spring.
Consumers, however, are still living in the present tense of higher prices. With US gasoline hovering above $4 for much of April, it’s easy to see why households are bracing for higher transport costs to show up next in food, services, and other essentials. It’s a gap worth emphasizing: markets can discount risk quickly, while the K‑shaped economy keeps highlighting the distance between Wall Street and Main Street.
Where markets have not looked through the noise is the US dollar, because Japan’s intervention forced immediate repricing. On April 30, the Bank of Japan (BoJ) reportedly intervened by buying yen and selling dollars, sending the yen up as much as ~3% and pushing USD/JPY down toward ~156.7, with the dollar marked for its biggest one‑day drop since August last year. By Friday, the intervention still mattered because it reset the near‑term reaction function: traders had to price a higher chance of follow‑through if depreciation pressure returned, which can cap USD/JPY rallies even when oil headlines stay loud. While US economic data remains resilient and Powell signals a policy drift toward a “more neutral place”, the seismic shock of the Yen’s intervention-led surge has superseded energy concerns momentarily, and weighed more heavily on the dollar, casting a more significant shadow over short-term dollar sentiment than the ongoing volatility in the crude markets. However, the lingering uncertainty around the new military operation, could see the Dollar recover some of its late month losses after BoJ intervention.
What’s happening in markets this week?
The week kicks off with global manufacturing PMIs and central bank commentary from both the Fed and the BoC (Mon). Next day, important RBA meeting on interest rate decision and US JOLTS job openings (Tue), which provide key insights into global policy shifts and labor demand. These events lead directly to the private sector ADP employment change and the US Treasury’s quarterly refunding announcement (Wed) as the heavy earnings season continues to ramp up.
Political and regional highlights follow with the high-stakes UK local elections and rate decisions from the Riksbank, Norges Bank and Banxico (Thu). On the same day, investors will monitor German factory orders and Euro-area retail sales for signs of a broader European recovery. The week reaches its peak with the highly anticipated US nonfarm payrolls and Canada’s employment report (Fri), serving as the ultimate health check for the North American economy.
CAD: Growth momentum stabilizes starting 2026
Real gross domestic product (GDP) in Canada grew by 0.2% in February, showing decent economic activity early in 2026. Goods-producing industries drove this growth with a 0.4% gain. Specifically, the manufacturing sector jumped 1.8%, marking its best monthly performance since January 2023. Strong rebounds in auto assembly and machinery production fueled this surge as Ontario plants ramped up. Furthermore, easing supply chain bottlenecks helped wholesale trade return to growth. At the same time, transportation and warehousing advanced 1.2% due to strong freight movement. Mining and oil extraction also posted steady gains. Ultimately, these broad increases easily offset localized weaknesses in the public sector and an Olympics-related dip in spectator sports.
Despite a flat preliminary estimate for March, February’s momentum sets up the Canadian economy for a strong first quarter. In fact, annualized growth is tracking at 1.7%. This figure comfortably beats the Bank of Canada’s (BoC) 1.5% forecast and suggests solid productivity gains against a backdrop of slowing population growth. However, the energy shock stemming from geopolitical conflicts is complicating this positive outlook. The BoC now faces a difficult monetary policy tug-of-war. On one hand, higher oil prices squeeze consumer purchasing power and act as a drag on the broader economy. On the other hand, triple-digit oil prices introduce serious upside risks to inflation. Consequently, the central bank will likely keep the policy rate anchored for an extended period, though persistent energy costs could eventually force them to hike rates.
Interestingly, this economic backdrop is not the main driver behind the Canadian dollar’s recent gains. Instead, the slide of USD/CAD toward the 1.36 level is primarily a US dollar story. As markets price in less extreme geopolitical outcomes, the greenback is slowly shedding its safe-haven conflict premium. Domestically, the Loonie lacks a strong secondary engine to pull the pair meaningfully closer to its fair value. February’s growth merely met market expectations, and sluggish CUSMA renegotiations continue to act as an overhead risk premium. Because the BoC’s current path is already priced in, the CAD remains vulnerable to US headline risks. Therefore, the currency pair will likely maintain a choppy bias around the 1.36 mark as we approach the next employment report. Also, today markets will be monitoring Governor Macklem remarks after last week’s monetary policy decision.
Market snapshot
Table: Currency trends, trading ranges & technical indicators
Key global risk events
Calendar: May 04 – 08
All times are in EST
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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.
