- USD/CAD eases as the US Dollar Index falls to a one-week low.
- Improving sentiment around a potential US-Iran de-escalation weighs on the Greenback, though risks around the Strait of Hormuz persist.
- Strong US data fails to lift the USD, while Canada’s PMI signals stagnation, leaving the pair driven mainly by Dollar dynamics.
USD/CAD trades with a softer tone on Wednesday, as a pullback in the US Dollar (USD) lends support to the Canadian Dollar (CAD). The pair is trading around 1.3891 at the time of writing, retreating after touching its highest level since December 2025 earlier this week.
The US Dollar is under pressure as recent comments from US President Donald Trump suggesting the US-Iran war could end within “two or three weeks” have improved risk appetite and reduced demand for the Greenback as a safe-haven asset.
However, the situation remains far from resolved, with tensions still centered around the reopening of the Strait of Hormuz. Donald Trump said in a post on Truth Social that Iran’s leadership had requested a ceasefire, adding that Washington would consider it only if the Strait of Hormuz is “open, free and clear.” He warned that until then, the US would continue military operations.
Meanwhile, Iran pushed back on the claim, with a Foreign Ministry spokesperson saying that reports of Tehran requesting a ceasefire are false, according to Al Jazeera.
While hopes of de-escalation have pushed Oil prices lower from recent highs, they remain elevated compared to pre-conflict levels but have failed to provide meaningful support to the commodity-linked Loonie, leaving USD/CAD largely driven by US Dollar dynamics.
Meanwhile, stronger US economic data failed to provide support to the Greenback. The US Dollar Index (DXY), which tracks the Greenback’s value against a basket of six major currencies, is hovering near 99.40, close to a one-week low after touching ten-month highs of 100.64 on Monday.
The ISM Manufacturing PMI rose to 52.7 in March, beating expectations of 52.5 and improving slightly from the previous 52.4. The ADP Employment Change rose by 62K in March, beating expectations of 40K but easing from the previous reading of 66K (revised from 63K).
Retail Sales increased by 0.6% in February, surpassing forecasts of 0.5% and rebounding from a revised -0.1% decline in January (previously -0.2%).
In Canada, the S&P Global Manufacturing PMI fell to 50 in March, down from 51 in February, signaling a stagnation in manufacturing sector performance.
On the monetary policy front, St. Louis Fed President Alberto Musalem said US monetary policy is “well positioned,” adding that holding interest rates steady is likely appropriate for some time.
