USD/CAD gave back an early gap-up and slipped to the mid-1.4200s in Asia after Friday’s pullback from around 1.4300, its highest level since April 2025. Softer US Treasury yields reduced support for the dollar, yet renewed weakness in crude oil, linked to expectations that a Russia-Ukraine energy ceasefire could lift supply, weighed on the commodity-linked Canadian dollar. A divergent Bank of Canada (BoC) versus Federal Reserve (Fed) outlook also limited conviction, with traders wary of pressing directional positions in holiday-thinned conditions.
Central Bank Policy Divergence
Policy expectations remained a key driver. The BoC is seen staying dovish amid a sluggish economy after weak jobs data, while the Fed has turned more hawkish and is pencilling in one additional 25-basis-point rate rise in late 2026.
Geopolitical And Technical Drivers
Geopolitical risk also underpinned demand for the greenback as tensions over the Strait of Hormuz persisted. Focus turns to US PPI on Wednesday and CPI on Thursday, followed by speeches from Fed Chair Kevin Warsh and BoC Governor Tiff Macklem on Friday at the IMF and World Bank meetings in Bangkok. Technically, 1.4300 is the upside trigger, while 1.4200–1.4210 and 1.4150 are key supports.
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