US/global recession risk drive the USD/CAD for now – Danske Bank

USD/CAD had an eventful start to April, dropping to the 1.40 level following broad USD weakness sparked by Trump's tariffs on Liberation Day, Danske Bank's FX analyst Frederik Romedahl reports.

Waiting for the next BoC meeting

"The cross concluded the week higher, around 1.42. Looking ahead, April features more event risks. On April 16, the BoC meeting takes place, during which a new MPR will also be published. Following the much weaker-than-expected Canadian job data on Friday, markets are now pricing in 13bp worth of cuts compared to 5bp before the release."

"Hence, we are likely in for yet another close call as has the been the case over the past half-year. April wraps up with the federal election on April 28. Retaliating against Trump's tariffs, Liberal PM Carney stands as the favourite to win the election, with prediction markets assigning a 72% probability of Carney clinching the victory."

"Importantly, Trump's tariffs and market perceptions of US/global recession risk will be the primary drivers of USD/CAD in the short term."