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Annual inflation in Canada, as measured by the change in the Consumer Price Index (CPI), climbed to 2.4% in March from 1.8% in February, Statistics Canada reported on Monday. This reading came in below the market expectation of 2.5%.

On a monthly basis, the CPI rose 0.9% following the 0.5% increase recorded in February, and at a softer pace than analysts' estimate of 1.1%.

The Bank of Canada's Consumer Price Index Core, which excludes volatile food and energy prices, was up 2.5% on a yearly basis, compared to 2.3% in February.

Market reaction to Canada inflation data

The USD/CAD pair showed no immediate reaction to CPI figures and was last seen trading virtually unchanged on the day at 1.3700.

This section below was published as a preview of Canada inflation data at 05:00 GMT.

• The Canadian Consumer Price Index is seen accelerating 1.1% in March following a 0.5% increase in February.
• The yearly CPI inflation is expected to have jumped to 2.5%, above the BoC’s target
• The Canadian Dollar maintains a positive tone against the US Dollar in April.

Canada’s economic docket opens on Monday with the key Consumer Price Index (CPI) figures for March, which will be closely watched to gauge the inflationary impact of the war in Iran. The data, released by Statistics Canada, is likely to confirm a significant increase in price pressures, driven by higher energy costs. 

Market analysts foresee the monthly CPI accelerating 1.1%, more than twice the 0.5% reading seen before the war started in February. Meanwhile, on an annual basis, the CPI is expected to have grown at a 2.5% year-on-year (YoY) rate, from 1.8% in the previous month. 

The sharp increase in Oil and Gas prices, due to the blockade of the Strait of Hormuz, would have been the main driver of higher inflationary figures. However, the core inflation, which strips the influence of energy and food prices, is seen fairly steady, rising  0.3% in March, compared to 0.4% in the previous month, and ticking up to 2.4% from 2.3% year-on-year.

These figures are likely to raise some eyebrows at the Bank of Canada’s (BoC) monetary policy committee, and, highly likely, bring the possibility of a rate hike back to the table. The BoC has lowered interest rates by 2.75% over the last two years.

What can we expect from Canada’s inflation rate?

Canada’s central bank left its benchmark interest rate unchanged, at 2.25%, at its March 18 meeting, but the monetary policy statement already warned about “increased volatility in global energy prices and financial markets, and heightened the risks to the global economy", stemming from the US-Iran war.

Inflation data for March will corroborate those fears. As previously stated, headline CPI inflation is expected to rise to 2.5% while core inflation would pick up to 2.4%, in both cases significantly above the central bank’s 2% inflation target. 

These figures will definitely raise market speculation about monetary tightening, although the broader macroeconomic picture clouds the bank’s monetary policy stance. The Canadian economy contracted by 0.2% in the last quarter of 2025, and the monthly Gross Domestic Product (GDP) showed a meagre 0.1% growth in January. Ivey Purchasing Managers’ Index (PMI) data from March revealed that business activity contracted for the first time since November, hinting at a soft end of the quarter.

In this context, BoC policymakers are likely to think twice before hiking interest rates too early, as it might damage an already frail growth, tipping the economy into a recession.  ING’s analyst Francesco Pesole points out: "Markets are pricing around 40bp of tightening by December, which looks too aggressive considering the BoC has not signalled much appetite for hikes, and attention may soon shift to USMCA renegotiations – a major downside risk for Canada’s activity and jobs."

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

Canada’s Consumer Price Index figures for March will be released by Statistics Canada on Monday at 12:30 GMT. Higher inflation figures, when they are driven by stronger economic activity and a tight labour market, tend to have a positive impact on the currency. This time, however, the scenario is somewhat different.

Canadian economic growth remains sluggish, weighed down by the higher tariffs from the US, its main trading partner. With this in mind, a sharp increase in inflation will create a headache for the Bank of Canada, which will have to choose between supporting economic growth and combating inflation, and might hurt the Loonie.

All things considered, a strong CPI is likely to raise concerns about stagflation and put the Canadian Dollar under pressure. In the current scenario, the CAD would be favoured by softer-than-expected inflation figures, which would buy some time for the Bank of Canada to wait for additional data before deciding its next monetary policy steps.

Regarding the USD/CAD, Guillermo Alcala, FX Analyst at FXStreet, observes the pair’s downward trend since early April, rather due to the US Dollar’s weakness, amid investors’ optimism about a resolution of the Middle East conflict, than to any intrinsic Canadian Dollar strength.

“Canadian Dollar bulls are focusing on the area between 1.3650 and 1.3670, where the USD/CAD found support last week and also on March 16 and 23, before the March 9 low at 1.3525”. Alcalá, however, warns about technical indicators: “The overbought levels in the 4-hour Relative StrengthIndex (RSI) and some bearish divergence in the Moving Average Convergence Divergence (MACD) histogram suggest that a corrective reaction might be ahead.”

On the upside, Alcalá sees the “1.3735 area (April 14 low) as immediate resistance, ahead of the April 15 high, right below 1.3790, and the April 13 highs around 1.3875.”

• EUR/USD trims losses and reaches the 1.1760 area after bouncing up from session lows around 1.1730.
• German Producer prices accelerated at the fastest pace in nearly four years in March.
• The Euro remains capped below a previous support area around 1.1770.

The Euro (EUR) has retraced previous losses against the US Dollar (USD) following a weak weekly opening, as rising tensions between the US and Iran have curbed hopes of a swift resolution of the conflict. The pair has returned to the 1.1760 area after hitting daily lows below 1.1730, but upside attempts remain capped below the lows seen at the end of last week, in the 1.1770 area.

Risk appetite remains subdued, as investors await developments from the Middle East after the seizure of an Iranian vessel by US authorities undermined an already frail ceasefire. On Monday, a spokesperson from the Iranian foreign ministry suggested that Tehran might not attend the second round of the peace talks scheduled to start next Tuesday.

In Europe, the German Producer Price Index (PPI) data has shown a 2.5% monthly increase in March, its strongest reading since August 2022, confirming the upside risks for inflation stemming from Iran's war. These figures follow strong wholesale prices and higher consumer inflation numbers in several other EU countries released last week, and add pressure on the European Central Bank (ECB) to hike interest rates in the coming months.

Technical Analysis: Resistance at former support near 1.1770

EUR/USD trades right above 1.1750, with a previous support area around 1.1770 capping bulls for now. Technical indicators in the 4-hour chart are in bearish territory. The Relative Strength Index (RSI) has eased to around 50, suggesting waning bullish momentum after the recent pullback, while the negative readings in the Moving Average Convergence Divergence (MACD) histogram hint that directional pressure remains modestly skewed to the downside.

Downside attempts remain contained above the previous tops, between 1.1720 and 1.1740, so far closing the path towards the key support area between the April 13 low, at 1.1680, and the support trendline from late March lows, now at 1.1660.

On the topside, initial resistance emerges at the aforementioned 1.1770 area (April 15, 16 lows). A break of that level exposes the April 16 highs at 1.1825 and then 1.1850.

(The technical analysis of this story was written with the help of an AI tool.)

Brown Brothers Harriman (BBH) highlights that renewed Strait of Hormuz tensions have lifted Brent Oil nearly $10 from recent lows and weighed on global risk assets, with the US Dollar (USD) slightly firmer. Elias Haddad argues the worst of the energy shock is likely past and expects interest rate differentials to keep the US Dollar Index (DXY) anchored in its 96.00–100.00 range, underscoring the Dollar’s dominant global role.

DXY expected to stay rangebound

"Financial market risk sentiment turns sour on renewed concerns over the Strait of Hormuz naval blockade. The US Navy seized an Iranian ship in the Gulf of Oman and Iran vowed to retaliate soon. Brent crude oil prices are nearly $10 higher from Friday’s $86 a barrel low."

"We are sticking to our view that while the energy shock may not be over, the worst is probably behind us. The US “Open for All or Closed to All” approach to navigation for vessels transiting the Strait of Hormuz is more likely to accelerate a reopening of that crucial waterway because shared economic pain raises the incentives for all parties to reach a workable diplomatic off-ramp. As such, interest rate differentials between the US and other major economies should continue to keep the DXY (USD index) anchored within its nearly one-year 96.00-100.00 range."

"The Wall Street Journal reported that the United Arab Emirates (UAE) is exploring the possibility of securing a currency swap line from the Fed or Treasury to hedge against a more severe economic shock from the Iran war. The fact that a well-capitalized energy exporting country is entertaining the idea of a bilateral currency swap line with the US underscores the dollar’s dominant role in the global financial system as medium of exchange and unit of account."

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

• Gold keeps treading water within a tight range below $4,850.
• Investors have returned to the safe-haven US Dollar, with the US-Iran peace talks in question.
• XAU/USD keeps trading sideways within the upper range of the last two weeks' horizontal channel.

Gold’s (XAU/USD) is practically flat at $4,790 on Monday, as investors return to the safety of the US Dollar (USD) amid threats to the US-Iran peace process. Looking at a wider perspective, the precious metal keeps trading back and forth within the upper range of the last two weeks’ horizontal channel, with key resistance at $4,850.

A spokesperson from the Iranian foreign ministry has threatened to skip the peace process after the US seized an Iranian cargo on Sunday, an action that was considered by Tehran an “aggressive act” and a violation of the ceasefire.

Investors, however, have not completely ruled out the possibility of both countries returning to the negotiating table on Tuesday, which is keeping the US Dollar from rallying further.

Technical Analysis

XAU/USD trades at $4,790 with a neutral-to-slightly bearish bias as it sits just beneath the top of the last two weeks' horizontal channel, at $4,850. Technical indicators in the 4-hour chart are showing a lack of clear bias.

The Moving Average Convergence Divergence (MACD) holds in negative territory, while the Relative Strength Index (RSI) hovers close to the 50 line, hinting at fading upside momentum rather than outright selling pressure.

Session lows at the $4,730 area are holding bears for now, keeping the channel bottom at the $4,600 area at a safe distance. On the upside, bulls should breach the mentioned $4,850 area (April 8, 14, and 15 highs), which would expose a previous support-turned-resistance right above $5,000.

(The technical analysis of this story was written with the help of an AI tool.)

Societe Generale strategists highlight that Brent futures have swung sharply with conflict headlines, recently rebounding to $95/bbl. They stress that physical balances remain tight, Strait of Hormuz logistics are severely constrained, and historical precedents suggest supply normalisation will be slow, prompting an upward revision to their end‑2026 Brent price forecast toward $85/bbl.

Brent repricing on protracted Gulf disruption

"For the current US–Iran conflict, we estimate that OPEC supply fell by roughly 42% in March, with a similar decline expected in April. Our base case assumes production begins to recover in May but does not fully normalise for around nine months. This trajectory aligns closely with historical experience: across the five most significant Middle East energy crises since 1956, supply normalisation has taken close to eight months on average."

"Against this backdrop, we stand ready to revise our end‑2026 Brent price forecast. Our base assumption is shifting toward a slower normalisation of Persian Gulf flows by mid‑May, rather than the earlier expectation of improvement by late April. This change alone lifts our end‑year Brent forecast from $79/bbl to $85/bbl."

"Even so, this revised level may still underestimate both the difficulty and duration of normalisation, particularly given the scale of shut‑ins and the constraints around shipping, insurance, port damage, and debris clearance."

"Consistent with both logistics and historical precedent, our working assumption remains that full normalisation occurs only toward the end of 2026, despite the recent easing in headline prices."

"Even under a best‑case scenario—assuming hostilities end by late April—global inventories are unlikely to begin a sustained path toward normalisation until late May at the earliest, and potentially later."

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