USD/CAD Market Update

Current Level: 1.3689 post-FOMC (intraday range 1.3672–1.3711)

USD/CAD is trading at 1.3689 post-FOMC, inside the 1.3672 to 1.3711 morning range, having fully reclaimed last Friday's level after Monday's sub-1.36 probe and now holding above the 1.3650 trendline that defined last week's defense. The Bank of Canada delivered the expected hold at 2.25% at 6:45 AM PT with an explicitly more hawkish risk profile, and the Federal Reserve followed at 11:00 AM PT with a hold in the 3.50% to 3.75% range that was decisively more hawkish than expected on the dissent count. Chair Powell's press conference at 11:30 AM PT — his last as Fed Chair before his term ends May 15 — is the next catalyst.

Market Overview:

Risk appetite is mixed this morning as equity markets opened flat ahead of the FOMC decision and a closely watched cluster of mega-cap technology earnings, with Microsoft, Amazon, Meta, and Alphabet all due to report after the closing bell. The US dollar firmed against the G10 basket as traders positioned into the Fed and the dollar index reversed last week's losses, supported by the renewed energy bid and the binary risk profile around Powell's future. Global bond yields are higher with no major moves of note. WTI is trading around 103 to 104 dollars per barrel per CIBC, with the Strait of Hormuz still effectively closed and the United States indicating an indefinite blockade against Iranian shipping. The combination of a firmer dollar, sustained energy price pressure, and now a hawkish-on-the-margin BoC and Fed has pushed USD/CAD off Monday's lows and held the pair in the low-1.37s through the FOMC.

Bank of Canada Holds, Risk Balance Tilts Hawkish:

The Bank of Canada kept the overnight rate unchanged at 2.25% at 6:45 AM PT this morning, the outcome universally expected by the 41 economists in last week's Reuters poll and the prediction-market and rates-curve consensus. The statement and accompanying Monetary Policy Report kept GDP forecasts unchanged at 1.2% for 2026, 1.6% for 2027, and 1.7% for 2028, and described inflation as peaking near 3% in April before gradually easing back to 2% by end-2027. The notable shift is in the risk balance: per CIBC, Macklem was explicit that if persistently high oil prices from the Iran conflict feed into broader inflation, the Bank "may need consecutive rises in policy rates." That framing inverts the usual easing bias and sets the bar for the next move higher than for the next move lower. CIBC's takeaway is that the BoC remains on hold for now but the balance of risks has clearly shifted toward hikes rather than cuts. CIBC's Central Bank Watch now prices a 0% probability of either action at the June 10 meeting, but markets are likely to add a small term premium to the front of the Canadian curve into the next inflation print.

Fed Holds, Three Dissents Against an Easing Bias:

The Federal Reserve held the target range at 3.50% to 3.75% at 11:00 AM PT, in line with the universal expectation, but with a statement that was decisively more hawkish than the market had positioned for. The headline is the dissent count: three FOMC members dissented against the inclusion of an easing bias, preferring instead to keep policy neutral and ready to move in either direction rather than tilted toward cuts. Three dissents on bias is the largest hawkish dissent cluster of the current cycle. The accompanying language, per CIBC, highlighted continued uncertainty tied to the conflict in the Middle East alongside sluggish job gains and building inflationary pressures — a combination that effectively confirms the oil-price-into-core-inflation channel that has been the dominant macro theme since the Iran conflict began. CIBC's read is unambiguous: the outcome is hawkish and USD-supportive, and the implied path for the December 2026 meeting will tighten further from the 78% hold / 15% cut / 5% hike that prevailed into this morning. Chair Powell's press conference begins at 11:30 AM PT — his last as Chair before his term ends May 15 — and the cross-asset reaction beyond the initial USD bid will be driven primarily by how he frames (a) the dissents, (b) the easing bias going forward, and (c) his own intentions, including whether he stays on as a Governor after a successor is confirmed. A clean, continuity-focused message would extend the dollar bid; any signal that he is prepared to clear the stage would partially fade it.

Canadian Data/Outlook:

With today's BoC behind us, attention shifts to Thursday's February GDP m/m print, forecast at 0.2% versus 0.1% prior. CIBC's economists look for an inline read driven by a rebound in manufacturing and continued strength in mining, oil and gas, with real estate still a drag, leaving Q1 GDP tracking around 1.8% annualized. A stronger reading would reinforce the hold-throughout-2026 base case that markets are increasingly priced for, but the more important data point for the front of the Canadian curve is the next CPI release given Macklem's explicit warning today that energy passthrough into broader inflation could force consecutive hikes. RBC's forecast table continues to hold the overnight rate flat at 2.25% through Q4 2026, and CIBC's strategists remain sellers of USD/CAD rallies with a 1.3500 Q2 target despite the now-hawkish read on both sides of the border.

Technical Picture:

Resistance: 1.3711 (overnight high, immediate cap), 1.3728 (top of RBC's prior expected band), 1.3799 (CIBC's preferred re-entry short zone), 1.3932 (major; has rejected four consecutive rallies since January and must close above to turn the outlook bullish)
Support: 1.3645 (upward trendline; held on the close-test through Monday's break attempt and now the key reclaim level), 1.3596 (Monday's intraday low), 1.3526 (year-to-date low), 1.3482 (subsequent year-to-date low), 1.3420 (September 2024 low and RBC's longer-term target)
Outlook: The pair has fully reversed Monday's sub-1.36 probe and is retesting the upper end of last week's range from below into a hawkish FOMC outcome. CIBC's directional view is unchanged at the desk-strategist level — sell rallies, target 1.3500 by Q2, and treat the 1.3700 to 1.3799 zone as the preferred fade — but the combined hawkish BoC and FOMC tilt is a meaningful technical curveball, opening the possibility that the recent break lower fails on the close-back-above 1.3645 and the pair grinds toward the 1.3799 short zone before the next move. A close above 1.3728 in the press-conference reaction window would call the bearish setup further into question, while a sharply dovish Powell tone — including a clean signal that he intends to remain on the Board — is the most plausible catalyst for a partial fade back toward 1.3645.

Week Ahead:

The Powell press conference is the immediate driver into the close. Thursday then layers in the BoE, ECB, Canadian GDP, and the US Q1 GDP plus Core PCE cluster — the highest-information data day of the month for rates and FX, and now landing on top of a confirmed hawkish-Fed setup.

Other Notes:

• The United Arab Emirates announced it will leave OPEC effective May 1 per Bloomberg, CNBC, and NPR, the first departure from the cartel in decades. The country has the ambition to reach 5 million barrels per day of capacity by 2027 and was the third-largest OPEC producer behind Saudi Arabia and Iraq. The near-term oil market remains dominated by Hormuz scarcity, but the medium-term supply outlook is structurally looser than it was a week ago.
• WTI is trading around 103 to 104 dollars per barrel per CIBC, with The Wall Street Journal reporting the United States is preparing to maintain an indefinite blockade against Iranian shipping. The sustained energy bid is the central reason both the BoC and the Fed are now leaning hawkish on the margin rather than continuing to telegraph cuts.
• Today's after-hours earnings cluster from Microsoft, Amazon, Meta, and Alphabet covers approximately 18% of S&P 500 market cap per CIBC and will set the tone for risk into month-end. Positioning is crowded and valuations are extended, so any disappointment is likely to drive a haven bid for the dollar on top of the FOMC tailwind.