Insights 
VT 
The Canadian Dollar has gained due to a weaker US Dollar, though its rise is restricted. Oil prices have dropped nearly 15% over two days following a Middle East ceasefire, affecting the CAD as oil is a major Canadian export.
The US Dollar Index has fallen over 1% from Monday’s highs due to improved market sentiment from an Israel-Iran ceasefire. This ceasefire has increased risk appetite and decreased demand for safe-haven assets like the US Dollar.
The Canadian Dollar and Oil Prices
The Canadian Dollar struggles to gain beyond recent lows, influenced by falling oil prices. Market participants are cautious as they await Canada’s CPI data release, which could affect the Bank of Canada’s monetary decisions.
In the United States, anticipation surrounds Fed chairman Powell’s Congress testimony as recent dovish Fed remarks have spurred hopes for future rate cuts. Meanwhile, oil’s price is influenced by factors like global growth, geopolitical tensions, and OPEC decisions.
WTI Oil is a key crude oil type impacting global markets, with its prices often swayed by supply-demand dynamics, particularly inventory changes and OPEC’s output policies. The Canadian market focuses on inflation data to gauge future economic moves.
What we’re seeing now is a Canadian Dollar that’s attempting to move higher, but is held back, especially by recent losses in oil. This isn’t surprising considering how much oil contributes to Canada’s export revenue. With crude falling nearly 15% over just two sessions — largely following an unexpected truce between Israel and Iran — the pressure on CAD is fairly direct. The ceasefire boosted confidence across financial markets, which in turn pulled investors out of traditional safe zones like the US Dollar, pushing the Dollar Index down more than one percent from earlier highs this week.
That said, even with the American currency retreating, the Canadian Dollar hasn’t found much footing above its recent levels. The weight of lower oil appears to counter any benefit from a weaker greenback. Traders are watching carefully for inflation numbers out of Canada. Everyone is aware that the figures carry weight, especially in terms of where the Bank of Canada might position itself at its next rate meeting. A softer result could reinforce the case for a pause or even a cut, especially as global economic indicators lean more cautiously.
South of the border, all eyes shift to upcoming testimony from Powell. Following statements from other US central bankers that suggest a less aggressive stance going forward, expectations have started leaning toward softer policy. Market participants have adjusted their outlooks to allow room for rate reductions down the line — though whether these come late in the year or not remains debatable. Powell’s comments could either firm up that view or bring some of the recent dovish mood into question.
Global Oil Dynamics
When it comes to oil — which remains central for energy-based currencies — the tug-of-war lies in global supply decisions and markers like worldwide demand. Crude prices are twitchy. We’ve noticed how even small pivot points in Middle East tensions or output guidance from OPEC can spark rapid moves either way. As traders try to forecast direction in energy contracts, it makes sense to keep one eye trained on weekly stockpile shifts and another on statements from oil-producing nations.
The response from markets has only added to the uncertainty. Traders have leaned toward safer trades one moment, and risk assets the next. This has left currency moves less predictable. While the US Dollar weakens under the current sentiment shift, the loonie has not had enough momentum from international developments alone to form a clear upward trend.
In this context, derivatives traders should be approaching CAD pairs with measured adjustment. Watch for inflation script from Statistics Canada, but also be ready to respond to swings in oil futures. Given the differential in interest rate perspectives between Canada and the US, any remarks from Washington this week could create short-term realignment in forward curves. Keep spreads modest, but flexible.
The days ahead offer lower visibility — not because of a lack of events, but due to the multiple overlapping factors moving prices. From our side, it’s not a time to chase breakouts; rather, patience matters more now than usual. Each piece of economic data and each geopolitical headline filters through to currency pricing quickly this time of year. We lean toward fading extremes unless and until one directional catalyst takes over and sustains.
