Loonie Firms Slightly

The Canadian dollar weakened 0.16% to around 1.38 per US dollar as a stronger US dollar and easing geopolitical tensions weighed on the loonie. The currency came under pressure as improved prospects for a Middle East ceasefire pushed oil prices lower, reducing support for the commodity-linked currency. Additional headwinds emerged after Canadian employment rose by 14.1K, below expectations, while the unemployment rate held at 6.7%, signaling a softening labor market.

The Canadian dollar strengthened toward 1.38 per US dollar as the greenback retreated following President Trump's decision to delay infrastructure strikes by two weeks in a conditional ceasefire. This relief rally stems from a sharp plunge in WTI crude after Iran agreed to reopen the Strait of Hormuz for a two-week window to facilitate negotiations. While lower energy prices typically weigh on the loonie, the broader collapse of the US dollar index to a four-week low has provided a net gain for the Canadian currency. Investors are now recalibrating the domestic outlook as the immediate threat of energy-driven stagflation recedes although the loonie continues to underperform peers like the aussie and sterling which are less tied to the petroleum complex. Treasury yields have further eroded the greenback's carry advantage even as the market remains cautious ahead of Friday’s US inflation data.

The Canadian dollar strengthened toward 1.39 per US dollar, as the US dollar lost ground following reports of a Pakistan-brokered 45-day ceasefire framework between Washington and Tehran. The loonie is finding support as fears of a catastrophic energy-driven inflation shock subside after Iranian officials shifted toward a tanker toll model in the Persian Gulf rather than a total blockade. This development reduced the immediate pressure on the Bank of Canada to maintain a highly restrictive monetary policy to combat secondary inflationary effects, effectively stabilizing the domestic outlook even as March manufacturing data showed a fifth month of contraction at 47.6. Although the US economy added a stronger-than-expected 178,000 jobs in March, the resultant shift away from safe-haven greenback holdings amid de-escalation hopes is currently overriding the yield advantage of the US dollar. Markets remain sensitive to President Trump’s looming Tuesday deadline for infrastructure strikes.