As we step into the second quarter of 2025, the Canadian foreign exchange (FX) market continues to respond to a complex mix of domestic policy signals, global economic pressures, and shifting investor sentiment. Here are the key developments shaping the Canadian dollar (CAD) and the broader financial landscape as of April 10, 2025.

Bank of Canada Holds Steady Amid Global Shifts

On April 3, the Bank of Canada (BoC) opted to keep its key interest rate unchanged at 3.25%, emphasizing the importance of economic stability amid persistent global headwinds. Governor Tiff Macklem reiterated that the central bank remains focused on data-dependent decisions, particularly as inflation remains anchored at 2.0% and employment indicators offer mixed signals.

The BoC’s tone was cautious but not alarmist, suggesting that while rate cuts remain a possibility later in the year, the current outlook doesn’t warrant immediate changes.

Canadian Dollar Trends

The CAD has shown resilience in early April, buoyed by stronger oil prices and investor confidence in the Canadian economy’s steady recovery:

• Against the U.S. Dollar: The CAD has slightly strengthened, trading near 1.34 USD, aided by a pullback in the greenback and rising commodity prices.
• Global Sentiment: Canada’s reputation as a stable commodity-based economy is attracting moderate investor interest, helping to limit currency volatility.

Economic Highlights

Several key indicators released this month are helping to shape market sentiment:

• Employment Data: The latest jobs report shows a net gain of 22,000 positions in March, with most growth in the healthcare and tech sectors. Unemployment remains stable at 6.7%.
• Business Outlook Survey: The BoC’s quarterly survey suggests that business sentiment is cautiously optimistic, with expectations of moderate sales growth and hiring in the next six months.
• Consumer Confidence: Retail activity saw a mild uptick in March, hinting at improving consumer confidence, despite ongoing concerns over household debt.

“In a world of shifting currents, economic resilience lies not in resisting change, but in navigating it with purpose and precision.”

External Market Forces

The CAD’s performance continues to be shaped by broader international factors:

• Oil Markets: Crude oil prices remained above $82 per barrel, providing key support for the CAD given Canada’s status as a major energy exporter.
• U.S. Federal Reserve Outlook: With the Fed signaling a potential pause in rate hikes, the interest rate differential between the U.S. and Canada has narrowed slightly, offering some relief to the CAD.
• Geopolitical Concerns: Ongoing tensions in Eastern Europe and trade disputes between the U.S. and China continue to drive global risk sentiment, indirectly affecting CAD volatility.

Outlook

Looking ahead, the CAD’s trajectory will likely depend on the interplay between domestic economic resilience and global macroeconomic shifts. The BoC’s careful navigation of policy, coupled with market optimism around oil and commodity demand, may offer continued support to the Canadian dollar in the near term.

Stay connected for more updates as the Canadian FX landscape continues to evolve in Q2 2025.