Synopsis:

CIBC expects USD/CAD to remain contained within the 1.3750–1.40 range for the rest of 2025, despite recent downside pressure driven by strong Canadian inflation data and broader USD selling.

Key Points:

• Canadian CPI Surprise: April’s trim and median CPI prints (3.1%/3.2%) beat expectations, adding short-term momentum to CAD strength.

• USD Selling Overdone: A surge in USD selling has accelerated USD/CAD’s drop faster than anticipated, with spot at 1.3872.

• Volatility Back to Normal: The single-day options implied range (±0.2%) has returned to pre-tariff-volatility levels, indicating a reversion to calmer FX conditions.

• Technical Anchoring: CIBC expects the 1.3750–1.40 zone to act as strong technical bounds, with little fundamental justification to push outside that range near-term.

Conclusion:

While recent data-driven CAD strength is notable, CIBC believes current momentum is unsustainable, and USD/CAD is likely to remain range-bound through year-end.