After sinking two full cents against the US Dollar last week, the Canadian Dollar had gained back about half a penny in early Monday morning trading. Global markets in general are taking a breather after a statement from Iran indicated that military action has ‘concluded’. While markets are still expecting an Israeli response, for the time being, it is not a pressing concern.

The USD/CAD pairing reacted strongly last week to rapid-fire news, including higher-than-expected inflation numbers in the US and comments by the Bank of Canada (BoC) that put a June rate cut on the table. The combination of events weakened the USD/CAD currency pair to 5-month lows and highlighted what appears to be a diverging direction between the Bank of Canada and the Federal Reserve. While Canada is expected to cut rates sooner rather than later, the opposite is now anticipated by the Fed.

Perhaps the only thing holding the BoC back would be if tomorrow’s Canadian inflation numbers register higher than the +0.7% expected by market watchers. The Canadian Federal Budget is also slated to be released tomorrow, and it is expected to influence the BoC’s decisions as more spending will be counterproductive to the BoC’s inflation fight.

The Canadian dollar is currently trading at 1.3762 CAD against the US Dollar.