TD Securities FX strategists Howard Du and Linda Cheng have flagged that a combination of soft April inflation and weak employment data out of Canada will keep the US dollar supported against the Canadian dollar (USD/CAD) near 1.37 through Q2 2026.
The Canadian dollar had been showing early signs of recovery, but the latest macro data has effectively pushed that timeline out. When inflation prints below expectations, central banks โ in this case the Bank of Canada โ have less reason to hold rates high, which reduces the yield appeal of the currency and keeps it under pressure against the USD.
Why Australian Traders Should Care
While USD/CAD is not a primary pair for most Australian retail traders, the broader signal matters. Both the Canadian dollar and the Australian dollar are commodity-linked currencies that tend to move in similar directions against the USD. A delayed recovery in CAD suggests risk appetite for commodity-bloc currencies remains subdued โ a dynamic that could weigh on AUD/USD as well.
Australia and Canada share significant exposure to resource exports โ oil for Canada, iron ore and coal for Australia. Softness in the loonie can sometimes act as a leading indicator for AUD sentiment, particularly when the weakness is driven by global demand concerns rather than country-specific factors.
What to Watch
For Australian traders, the key question is whether similar disinflationary pressures emerge locally. The next Australian CPI print and RBA meeting commentary will be critical in determining whether AUD/USD can hold current levels or faces its own delay in recovery.
If USD strength continues to be validated by weak data across multiple commodity currencies โ CAD, AUD, NZD โ the US dollar index (DXY) could find renewed support, placing additional pressure on risk assets including the ASX 200 and gold priced in USD terms.
Directional bias: Wait-and-see โ commodity-bloc currencies including AUD remain vulnerable while USD demand stays firm on relative data strength.
Source: FX Street