Forex News

• Annual inflation in Canada accelerates to 2.8% in April but remains slightly below market expectations.
• Bank of Canada core inflation measures continue to ease, reinforcing the idea of gradual disinflation.
• The US Dollar remains supported by safe-haven demand linked to Middle East tensions and resilient private employment data.

USD/CAD moves higher on Tuesday and trades around 1.3760 at the time of writing, up 0.17% on the day, as the Canadian Dollar (CAD) struggles to fully benefit from higher Oil prices. West Texas Intermediate (WTI) trades at $102.70, up 0.60% on the day, which would normally support the Canadian currency given the importance of energy exports to the Canadian economy.

Data released on Tuesday showed that inflation in Canada accelerated in April. The Consumer Price Index (CPI) rose by 2.8% YoY, compared with 2.4% previously, although it came in slightly below market expectations. On a monthly basis, prices increased by 0.4%.

However, the Bank of Canada (BoC) preferred core measure used to assess underlying inflationary pressures continued to show signs of easing. BoC Core CPI slowed to 2.1% YoY from 2.5%. Together, these figures suggest that inflationary pressures remain relatively sticky but continue to follow a gradual downward trend.

Meanwhile, the US Dollar (USD) maintains a broader bullish bias. Investors continue to favor safe-haven assets as geopolitical tensions surrounding Iran fuel risk aversion. Reports of explosions on Iran’s Qeshm Island and concerns about reduced traffic through the Strait of Hormuz continue to raise fears about global energy supply disruptions.

US data released earlier also supported the Greenback. ADP Employment Change showed that private employers in the United States (US) added an average of 42.25K jobs per week in early May, up from 33K previously, signaling an improvement in private-sector hiring momentum.

Despite the rise in Oil prices, the combination of a firmer US Dollar and Canadian inflation that did not accelerate enough to significantly alter monetary policy expectations appears to be maintaining upward pressure on USD/CAD.

Commerzbank’s Carsten Fritsch says platinum remains in a multi-year deficit, with above-ground stocks expected to cover less than three months of demand in 2026. However, World Platinum Investment Council (WPIC) data also point to a Q1 surplus and weaker demand. Fritsch sees platinum reaching USD 2,300/oz by year-end, mainly on higher Gold prices.

Tight stocks but weaker demand outlook

"The World Platinum Investment Council (WPIC) expects the platinum market to face a supply deficit of 297,000 ounces this year. This would mark the fourth consecutive year of a supply deficit in the platinum market. The supply deficit is also expected to be slightly higher than previously anticipated."

"With the deficit expected this year, above-ground stocks are set to fall to 1.747 million ounces and the stock-to-use ratio to 22%. Stocks would therefore cover demand for less than three months. It is also worth noting that the previous forecast for inventory levels this year was significantly higher, at 2.613 million ounces."

"However, there are also signs that market tightness is easing. For instance, in the first quarter, the platinum market recorded a supply surplus for the first time in six quarters. According to the WPIC, this stood at 268,000 ounces, compared with a supply deficit of 658,000 ounces in the corresponding quarter of the previous year."

"Platinum demand is expected to fall by 9% this year to a four-year low of 7.674 million ounces, according to the WPIC. The main factor weighing on demand is a significant weakening in investment demand, which is expected to more than halve compared with last year. The reasons for this are expected net outflows from platinum ETFs and an anticipated decline in exchange-registered stocks."

"The platinum price is therefore unlikely to generate strength of its own accord. Our expected rise in the price of platinum to USD 2,300 per troy ounce by the end of the year is primarily based on our forecast of a rising gold price."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)

TD Securities interprets the Reserve Bank of Australia (RBA) May Minutes as reinforcing a preference to stay on the sidelines near term, with markets pricing only a small chance of a June hike. The Board views financial conditions as somewhat restrictive, but TD expects another rate increase in August as broader price pressures emerge in upcoming Consumer Price Index (CPI) data despite temporary fuel-related disinflation.

Board cautious but further hike expected

"The RBA May Minutes emphasized again the Board's preference to stay on the sidelines for now, which implies that the RBA will skip a hike at the June meeting."

"OIS markets are pricing the same skip scenario with only 20% odds assigned for a June hike."

"In the minutes, the Board members judged that financial conditions are somewhat restrictive after the May 25bps hike as the cash rate is likely near/above the RBA's nominal neutral interest rate estimate."

"Of concern to the Board is the rise in short-run inflation expectations as the increase in fuel costs would lead to broader inflation pressures as reported by their liaison program- an increasing share of consumer-facing firms are expecting above-average price increases over the coming year."

"We expect the RBA to hike again in August as broader price pressures become more evident in the coming CPI reports, despite the temporary cut in fuel excise duty reducing annual CPI inflation in April by 0.5%-pt in next week's monthly report."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)

MUFG's Lee Hardman highlights a sharp GBP rebound, with GBP/USD back above 1.3400 as reports suggest Andy Burnham would keep existing United Kingdom (UK) fiscal rules. This apparent fiscal policy u-turn is seen reducing downside risks for Gilts and the Pound, though weaker UK labour data tempers expectations for further Bank of England (BoE) tightening in the near term.

Fiscal reassurance offsets weak labour data

"The pound has staged a strong rebound over the last twenty four hours resulting in cable rising back above the 1.3400-level after hitting a low yesterday at 1.3303."

"The apparent fiscal policy “u-turn” should help to ease downside risks for gilts and the pound in the near-term from heightened political uncertainty in the UK."

"However, the relief rebound for the pound has been dampened this morning by the release of much weaker than expected UK labour market data."

"It is likely that the April figures overstate the underlying scale of labour market weakness, although the report as a whole is consistent with ongoing slack labour market slack."

"It will put a dampener on near-term market expectations for BoE rate hikes in response to the energy price shock."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)

ING strategists Francesco Pesole, Frantisek Taborsky and Chris Turner see upside risks for the Dollar as bond markets remain volatile and Middle East developments drive sentiment. With US data light, they argue DXY could extend gains if Iran talks stall, while pro‑cyclical G10 and EM currencies look vulnerable and USD/JPY is seen testing Japanese intervention levels.

Dollar supported by bonds and geopolitics

"We think risks remain on the upside for the dollar in this volatile bond environment. Unlike in 2025, the ongoing bear steepening of the US Treasury curve is dollar-positive, as it is being driven by rising inflation fears rather than fiscal concerns."

"With the US data calendar thinning out, the next directional cue for bonds and FX is likely to come from the Middle East. President Trump said yesterday that he had called off a strike on Iran after appeals from Gulf countries, pointing to “serious negotiations”. Yet press reports continue to highlight a wide gap between the US and Iran on peace and nuclear terms. If tangible progress fails to materialise in the coming days, DXY could push through 99.50 even without a renewed military escalation."

"Against this backdrop, the early-week rebound in pro-cyclical G10 and EM currencies versus the USD looks vulnerable, and hinges on some positive Middle East news as much as good earnings by Nvidia tomorrow."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)

Canada’s inflation picked up pace in April, with the Consumer Price Index (CPI) rising 2.8% from a year earlier, below market expectations and up from the 2.4% increase recorded in March. On a monthly basis, prices rose 0.4%.

Meanwhile, the Bank of Canada’s (BoC) preferred core measure, which excludes more volatile components such as food and energy, rose 2.1% over the past year and increased by 0.2% compared with the previous month.

Looking at the BoC’s other key inflation gauges, Common CPI came in at 2.5% (from 2.6% ), Trimmed CPI at 2.0% (from 2.2%), and Median CPI at 2.1% (from 2.3%). Together, they show that underlying price pressures are still fairly sticky albeit on a downward trend.

According to the press release: “Higher energy prices, most notably gasoline prices, drove the acceleration in the headline CPI. The removal of the consumer carbon levy in April 2025, which resulted in monthly declines for gasoline and natural gas, has now fallen out of the 12-month movement, putting upward pressure on the all-items CPI. Excluding gasoline, the CPI rose at a slower pace year over year in April (+2.0%) compared with March (+2.2%).”

Market reaction

The Canadian Dollar (CAD) remains on the back foot on Tuesday, motivating USD/CAD to advance to new multi-week tops past 1.3770 in the wake of the release of domestic inflation data.

This section below was published as a preview of the Canadian inflation report for April at 08:00 GMT.

• Canadian inflation is expected to rise by 3.1% YoY in April.
• The core CPI is still seen well above the BoC’s 2% target.
• The Canadian Dollar has been trading lower against the US Dollar recently.

The publication of Canada’s April Consumer Price Index (CPI) figures on Tuesday will be the focus of attention. Indeed, Statistics Canada data will provide the Bank of Canada (BoC) with a much-needed update on price pressures ahead of its June 10 meeting, where policymakers are widely expected to keep rates steady at 2.25%.

Economists see the headline CPI rising by 3.1% in a year to April, gathering pace above the BoC’s target and up from March’s 2.4% annual increase. On a monthly basis, prices are expected to rise by 0.8%. The bank will also closely monitor its core measure (which strips food and energy costs), which came in at 2.5% YoY in the previous month.

Policymakers remain uneasy, as increasing risks of US tariffs and the ongoing crisis in the Middle East feeding into domestic prices are adding another layer of uncertainty.

What can we expect from Canada’s inflation rate?

No one is expecting inflation to remain unchanged, let alone lose momentum, in April. Against this backdrop, and mirroring what has happened in the US following hotter-than-estimated CPI data last month, the Bank of Canada should reinforce its cautious stance and lean further toward its data-dependent point of view.

Indeed, the central bank is expected to maintain its steady hand at its June 10 gathering, following four consecutive ‘on hold’ decisions, although a higher-for-longer view of domestic consumer prices could open the door to a tighter monetary policy.

At its latest event, the BoC signalled an upbeat medium-term outlook for economic growth while revising inflation higher for the current year. In addition, Governor Tiff Macklem delivered a cautious message at his press conference, keeping the data-dependent stance well in place while leaving the door open to higher rates in case energy prices remain elevated.

So far, market participants expect just over 50 basis points of tightening by year-end.

Additionally, the bank’s preferred gauges, CPI-Common, Trimmed Mean, and Median, also moderated, but at 2.6%, 2.2%, and 2.3%, respectively, they continued to run above the 2% objective.

When is the Canada CPI data due, and how could it affect USD/CAD?

Markets will fully focus on Tuesday at 12:30 GMT, when Statistics Canada publishes April’s inflation figures. There’s a sense of nervous anticipation, with traders wary that price pressures might gather traction and keep monetary conditions pretty tight.

Pablo Piovano, Senior Analyst at FXStreet, notes that USD/CAD has been on a steady uptrend since the beginning of the month, almost entirely tracking developments from the Middle East conflicts and the US Dollar’s (USD) price action.

Piovano points out that USD/CAD seems to have met some resistance around monthly tops near 1.3770. Once this area is cleared, the pair could embark on a potential trip toward its significant 200-day SMA around 1.3810.

On the flip side, he highlights initial support at the May floor of 1.3549 (May 1), seconded by the March base at 1.3525 (March 9), the February valley at 1.3504 (February 11) and the 2026 bottom at 1.3481 (January 30).

“Momentum appears mixed,” he adds, noting that the Relative Strength Index (RSI) is navigating just below the 59 level, although the Average Directional Index (ADX) near 17 suggests the underlying trend still lacks juice.