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USD/CAD declines on softer US Dollar as Strait of Hormuz reopens, Canada CPI looms

  • USD/CAD falls to around 1.3670 on Friday despite the drop in Oil prices.
  • Oil prices decline after Iran announces the full reopening of the Strait of Hormuz.
  • Investors now turn their attention to Canada’s March inflation data due Monday.

USD/CAD declines on Friday, trading around 1.3670 at the time of writing, down 0.26% on the day. The pair remains under pressure as the Canadian Dollar (CAD) strengthens against the US Dollar (USD) despite a sharp drop in Oil prices.

Markets are reacting to geopolitical developments in the Middle East. Iran’s Foreign Minister Abbas Araghchi announced that the Strait of Hormuz is now fully open to commercial shipping during the current ceasefire period. The decision marks a significant de-escalation after several weeks of tensions around one of the world’s most strategic maritime routes.

The reopening of the strait triggered a sharp drop in Oil prices as fears of global supply disruptions faded. West Texas Intermediate (WTI) is trading around $80 per barrel, marking one of its steepest daily declines in recent weeks as Crude export flows through the Gulf are expected to normalize.

In this context, the strength of the Canadian Dollar appears counterintuitive, as the currency is typically highly correlated with energy prices, Canada’s main export. Instead, currency movements seem to reflect broader weakness in the US Dollar.

The US Dollar Index (DXY), which measures the Greenback against a basket of six major currencies, is trading near multi-week lows around 97.80. The decline in the US Dollar comes as markets reassess the outlook for US monetary policy following the recent easing in energy prices.

According to the CME FedWatch tool, markets are now pricing a 38.2% chance of a 25-basis-point rate cut by the Federal Reserve (Fed) by the end of the year, up from 25.9% the previous day.

In Canada, investor attention is now turning to inflation data. The Consumer Price Index (CPI) for March will be released on Monday and is expected to show a significant acceleration in prices, driven by the energy shock triggered by the war involving Iran.

Bank of Canada (BoC) Governor Tiff Macklem recently warned that the economy could face “higher price levels,” highlighting during a conference at the Montreal Chamber of Commerce the challenge of keeping inflation anchored without triggering a marked economic slowdown.

US Dollar Price Today

The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the strongest against the Euro.

USDEURGBPJPYCADAUDNZDCHF
USD-0.11%-0.15%-0.62%-0.21%-0.35%-0.25%-0.50%
EUR0.11%-0.05%-0.52%-0.09%-0.25%-0.15%-0.41%
GBP0.15%0.05%-0.49%-0.05%-0.20%-0.10%-0.35%
JPY0.62%0.52%0.49%0.44%0.29%0.37%0.14%
CAD0.21%0.09%0.05%-0.44%-0.14%-0.06%-0.28%
AUD0.35%0.25%0.20%-0.29%0.14%0.10%-0.18%
NZD0.25%0.15%0.10%-0.37%0.06%-0.10%-0.25%
CHF0.50%0.41%0.35%-0.14%0.28%0.18%0.25%

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).

Author

Ghiles Guezout

Ghiles Guezout is a Market Analyst with a strong background in stock market investments, trading, and cryptocurrencies. He combines fundamental and technical analysis skills to identify market opportunities.

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