The USD/CAD has reached new three-week lows at 1.3670 after experiencing a five-day decline. The potential for a resolution in the US-Iran conflict continues to exert downward pressure on the safe-haven USD. Canada’s CPI figures, set to be released on Monday, are anticipated to indicate increased inflationary pressures for March. The US Dollar continues its downward trajectory against the Canadian Dollar on Friday, hitting three-week lows at 1.3670. The USD/CAD pair has experienced a steady decline over the past five days, positioning itself for a 1.3% weekly downturn, as optimism surrounding potential peace talks between the US and Iran this weekend exerts pressure on the safe-haven US Dollar.
Reports from the Middle East present a varied picture; however, the market continues to concentrate on the favorable remarks made by US President Donald Trump. On Thursday, Trump declared a 10-day ceasefire between Lebanon and Israel, stating that a resolution to the ongoing tensions in Iran is “very close.” A report has dampened expectations for a consistent peace agreement emerging from this weekend’s negotiations. According to Iranian sources referenced in the report, it appears that negotiators have adjusted their objectives and are currently pursuing a “temporary memorandum” in order to prevent a resurgence of conflict.
Meanwhile, the Strait of Hormuz remains closed, resulting in Crude prices approximately 35% higher than pre-war levels. The Governor of the Bank of Canada, Tiff Macklem, cautioned on Thursday regarding “higher price levels” during a conference at the Montreal Chamber of Commerce, emphasizing the difficulties in maintaining inflation stability without causing a recession.
In that context, the Canadian Consumer Prices Index figures from March, set to be released on Monday, are anticipated to confirm those concerns. Consumer inflation is anticipated to have increased markedly, driven by the energy shock resulting from Iran’s conflict. Should the final figures align with expectations, apprehensions regarding stagflation could impact the strength of the Canadian Dollar.