Dollar Index Rebounds
The US Dollar Index (DXY) traded near 99.98 after rebounding from an intraday low around 99.76. DXY tracks the Greenback against a basket of six major currencies. Iran called for a permanent end to the war in response to the US proposal, according to IRNA, and rejected a ceasefire framework conveyed via Pakistan. A US official cited by Axios said Iran sent a 10-point response described as “maximalist”. A deadline set by US President Donald Trump was referenced, with a warning of potential strikes on power plants and other civilian infrastructure if the Strait of Hormuz is not reopened by Tuesday at 8:00 p.m. Eastern Time. Oil price rises were linked to inflation pressure and global growth worries, affecting the outlook for the Federal Reserve and the Bank of Canada. In data, the ISM Services PMI for March was 54, down from 56.1 and below 55 expected. Forthcoming releases include US March CPI, February PCE, and Canada’s March employment data.Correction And Market Volatility
A correction dated April 6 at 17:15 GMT stated USD/CAD was 1.3921, not 1.1315. Given the high uncertainty around the US-Iran ceasefire talks, we are preparing for a sharp increase in market volatility. The Tuesday deadline for reopening the Strait of Hormuz is a major flashpoint that could cause erratic price swings in either direction. This environment makes buying volatility through options, such as straddles on the USD/CAD pair, a sensible strategy to consider in the coming days. We are closely watching crude oil prices, as the war has pushed WTI futures above $115 a barrel, a significant jump from the sub-$90 levels we saw for most of late 2025. As a major oil exporter, Canada’s economy benefits from higher prices, which could lend further strength to the Loonie against the Greenback. This suggests positioning for potential CAD upside if the conflict continues to disrupt global energy supplies. However, we must also respect the US Dollar’s role as a primary safe-haven asset during times of global stress. The CBOE Volatility Index (VIX), a key measure of market fear, has been elevated, consistently trading above the 30-point mark for the last two weeks. A significant military escalation could easily trigger a flight to safety that would overwhelm the oil price factor and push the USD/CAD pair higher. The upcoming economic data adds another layer of complexity to our decisions. Last month’s US headline CPI already surprised to the upside at 4.1% year-over-year, and another hot inflation report this week could force the Fed into a more aggressive stance. Meanwhile, the Canadian employment figures will be weighed against the backdrop of the strong 2.5% annualized GDP growth reported for the fourth quarter of 2025. Create your live VT Markets account and start trading now.
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