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Bank of Canada left its policy rate unchanged at 2.25%, maintaining a cautious stance as it navigates the inflation impact of the Middle East conflict. While headline inflation is rising, policymakers signaled they are prepared to look through the immediate energy-driven shock, focusing instead on whether it feeds into broader and more persistent pressures.

Inflation projections were revised higher in the near term. CPI rose from earlier trends to 2.4% in March and is expected to climb further to around 3% in April, driven primarily by gasoline prices. However, the BoC emphasized that core inflation remains stable "just above 2%", and there is so far "little evidence" that higher energy costs are feeding through into goods and services prices more broadly. Inflation is still expected to return to the 2% target early next year as oil prices are assumed to ease.

On growth, the outlook remains broadly unchanged despite the global shock. GDP is projected to rise by 1.2% in 2026, 1.6% in 2027, and 1.7% in 2028. The economy is recovering from a contraction in late 2025, supported by consumer and government spending, while exports and business investment remain constrained by tariffs and trade uncertainty. The labor market continues to show softness, with unemployment holding in the 6.5–7% range.

The oil shock presents a mixed impact for Canada. As a net exporter of energy, higher oil prices "increase national income" even as "consumers are squeezed by higher gasoline prices". This dynamic allows the BoC to tolerate near-term inflation volatility while maintaining its focus on underlying economic conditions.

Full BoC statement here.

The Bank of Canada today held its target for the overnight rate at 2.25%, with the Bank Rate at 2.5% and the deposit rate at 2.20%.

The evolving conflict in the Middle East is causing heightened volatility and US trade policy continues to reshape global trade patterns. Both are ongoing sources of uncertainty. The Bank’s April outlook assumes tariffs remain unchanged and the global benchmark price of oil declines to US$75 per barrel by mid 2027.

The Iran war has led to sharply higher energy prices and transportation disruptions, diminishing growth prospects in oil-importing countries and boosting inflation worldwide. In the United States, growth is still expected to be solid over the projection horizon, boosted by AI-related investment and consumption growth. China’s economy is being supported by robust exports. In the euro area, higher prices for oil and natural gas will weigh on economic activity.

Financial conditions have been volatile, reflecting daily developments in the Middle East and shifting market expectations for inflation and interest rates. Bond yields are modestly higher since January while equity markets, which weakened sharply at the outset of the war, have recovered. Since the start of the war, the US dollar has appreciated against most major currencies. The Canada-US exchange rate has been relatively stable.

Overall, the global economy is expected to grow by about 3% in 2026, 2027 and 2028. Projections for inflation over the next year are revised up because of the jump in energy prices.

The outlook for economic growth in Canada is little changed from the January Monetary Policy Report (MPR) projection. After a contraction in the fourth quarter of 2025, growth is forecast to have resumed in early 2026. Consumer and government spending are supporting economic activity, while tariffs and trade uncertainty are weighing on exports and business investment. Housing activity declined in the fourth quarter and is being held back by slow population growth, economic uncertainty and ongoing affordability issues. The labour market is soft, with subdued employment growth over the past year and job losses in sectors targeted by US tariffs. The unemployment rate remains in the 6½%‑7% range, reflecting both weak hiring and fewer job seekers.

The Bank’s April forecast projects GDP growth of 1.2% in 2026, rising to 1.6% in 2027 and 1.7% in 2028 as growth in exports and business investment resumes along a lower trajectory. With GDP growing slightly above potential, the current excess supply in the economy is gradually absorbed. While the war in Iran may alter its composition, overall GDP growth is little changed in the updated forecast: Since Canada is a large net exporter of oil, higher oil prices increase national income even as consumers are squeezed by higher gasoline prices.

CPI inflation climbed to 2.4% in March because of sharply higher gasoline prices. The March increase follows several months of slowing inflation data. Core inflation has been easing and held steady at just above 2% in the most recent inflation report. The proportion of components of the CPI basket rising above 3% has also declined in recent months. As expected, so far there is little evidence that oil prices have fed through more broadly to goods and services prices, but this warrants close attention in the months ahead. Near-term inflation expectations have moved up with higher gasoline prices and still-elevated food price inflation, but longer-term inflation expectations have remained anchored.

CPI inflation will likely rise further in April to about 3%. Based on the assumption that oil prices will ease, inflation is forecast to come down to the 2% target early next year and remain around 2% over the projection horizon.

Against this backdrop and taking into account the current projection, Governing Council decided to maintain the policy rate at 2.25%. We are closely monitoring the impact of the conflict in the Middle East and how the economy is responding to US tariffs and trade policy uncertainty. Governing Council is looking through the war’s immediate impact on inflation but will not let higher energy prices become persistent inflation. As the outlook evolves, we stand ready to respond as needed. The Bank is committed to maintaining Canadians’ confidence in price stability through this period of global upheaval.

Information note

The next scheduled date for announcing the overnight rate target is June 10, 2026. The Bank’s next MPR will be released on July 15, 2026.

Key takeaways

• Silver underperforms despite geopolitical risk: Silver (XAG/USD) has lagged major assets, falling sharply since the US–Iran conflict and failing to attract safe-haven demand, with momentum—not fundamentals—driving price action.
• Bearish trend remains intact technically: A breakdown below the 20-day moving average and rejection at the 50-day MA signal the end of the prior rebound, reinforcing a broader corrective downtrend from January highs.
• Downside risks dominate below key resistance: Holding below $75.90 keeps the bearish bias intact, with potential further declines toward $69.64 and $67.70, while only a sustained break above resistance would negate the negative outlook.

Precious metals, gold and silver, have failed to ignite a similar risk-on rally in terms of magnitude and duration as seen on the benchmark US stock indices and other major stock indices after the “fragile” ceasefire agreement between the US and Iran that has been in place on 8 April 2026.

Silver flipped to become an underperforming asset class

Fig. 1: Silver & other major cross assets performances from 27 Feb 2026 to 28 Apr 2026 (Source: MacroMicro).

Fig. 2: Silver & other major cross assets year-to-date performances as of 28 Apr 2026 (Source: MacroMicro).

The US-Iran war started on 28 February 2026. Using the pre-war baseline of 27 February 2026 to Tuesday, 28 April 2026, spot silver (LBMA) was the worst performer among other key cross assets, with a loss of 19% (see Fig. 1).

On a year-to-date performance basis as of 28 April 2026, spot silver’s gain has been reduced miserably to 1.7% (see Fig. 2).

Despite the geopolitical gridlock between the US and Iran, and any miscalculation from either side is likely to trigger a rise in geopolitical risk premiums, we are not seeing any safe-haven demand push towards precious metals at this juncture.

Hence, it is the momentum factor that is driving the direction of silver at this juncture and overrides fundamental elements.

Let’s now focus on the technical factors to determine silver (XAG/USD)’s potential short-term trajectory (1 to 3 days).

Silver (XAG/USD) – End of corrective rebound from 23 March 2026 low

Fig. 3: Silver (XAG/USD) minor trend as of 29 Apr 2026 (Source: TradingView).

Fig. 4: Silver (XAG/USD) medium-term trend as of 29 Apr 2026 (Source: TradingView).

The price actions of silver (XAG/USD) have staged a bearish breakdown below its 20-day moving average on Tuesday, 28 April 2026, coupled with an earlier rejection around its 50-day moving average on 16 April 2026, suggesting that the 36% corrective rebound from the 29 April 2026 low has been damaged (see Fig. 4).

Start of another minor bearish impulsive down move sequence with a multi-month medium-term corrective decline structure that is still intact since its current all-time high of $121.67 printed on 29 January 2026

Watch 75.90 key short-term pivotal resistance on silver (XAG/USD) for another potential down leg to expose the next intermediate supports at 69.64 and 67.70/66.83 (also a Fibonacci extension) in the first step (see Fig. 3).

On the other hand, a clearance and an hourly close above 75.90 invalidates the bearish scenario for a sequence up to retest the next intermediate resistance at 78.30 (also the 50-day moving average).

Key elements to support the near-term bearish bias on silver (XAG/USD)

• Since its “bearish flag” and 20-day moving average breakdown, the price actions of silver (XAG/USD) have been oscillating within a minor descending channel.
• Price actions have not reached the lower boundary of the minor descending channel which confluences at around the 67.70/66.83 support zone.
• The daily RSI momentum indicator has continued to flash out a bearish momentum condition and has not reached its oversold region (below the 30 level).

• The US has no intention of reopening the Strait of Hormuz and is demanding that Iran sign an agreement.
• The narrowing of the spread between the spot and futures markets is a positive sign, but it is not enough.

The UAE’s decision to withdraw from OPEC and OPEC+ came as a surprise but did not send shockwaves through the oil market. This move could undermine the cartel’s position and increase the UAE’s production capacity from its current quota of 3.4 million bpd to a technically feasible 4.8 million bpd. However, we did not see an immediate market reaction in the form of a decline in Brent and WTI prices, despite the Strait of Hormuz blockade, which has reduced production to just 1.8 million bpd.

North Sea crude has been rising for 7 of the last 8 days, as Donald Trump threatens to prolong the blockade of the key oil artery indefinitely and appeals to Iran’s reason. Tehran must abandon its plans to develop nuclear weapons and sign the deal. Any resistance will keep the Strait of Hormuz closed. Ongoing supply disruptions and fears that the situation will worsen are driving Brent and WTI prices ever higher.

US politicians are doing everything they can to mitigate the negative impact. Trump intends to meet with American oil producers, is temporarily lifting sanctions on Russia, and welcomes the UAE’s intention to leave OPEC. Abu Dhabi is beginning to offer its customers barrels from Fujairah, outside the Persian Gulf. The United Arab Emirates accounted for around 13% of the cartel’s production capacity. The breakdown in relations will damage the organisation’s ability to manage the black gold market and risks increasing the number of defectors dissatisfied with Saudi Arabia’s actions.

It should be noted that the premium between spot oil and futures is narrowing. They reached $30 per barrel in early April; however, this is due in no small part to the rise in futures prices as the expected timeline for the normalisation of supplies has been pushed back. Spot prices are also under pressure from reduced demand from oil refineries, their drawdown of previously held reserves, and large-scale sales of commercial stocks by China’s Sinopec and PetroChina.

There is some good news, but the situation on the oil market remains tense. The World Bank notes that, due to supply disruptions, commodity prices are set to soar to their highest levels in four years. The organisation has raised its forecast for the average Brent price in 2026 from $60 per barrel in January to $86.

Daily Pivots: (S1) 1.1684; (P) 1.1706; (R1) 1.1735; More….

Range trading continues in EUR/USD and intraday bias stays neutral. Further rally is expected with 1.1662 support intact. On the upside, sustained trading above 61.8% retracement of 1.2081 to 1.1408 at 1.1824 will pave the way to retest 1.2081 high. However, firm break of 1.1662 support will indicate the the rebound from 1.1408 has completed, and bring deeper decline back towards this low instead.

In the bigger picture, the strong support from 38.2% retracement of 1.0176 to 1.2081 at 1.1353 suggests that the pullback from 1.2081 is more likely a corrective move. Strong support was also found in 55 W EMA (now at 1.1530). Focus is back on 1.2 key cluster resistance level. Decisive break there will carry long term bullish implications. Nevertheless, break of 1.1408 support will revive the case of medium term bearish trend reversal.

Daily Pivots: (S1) 1.3472; (P) 1.3509; (R1) 1.3556; More...

Intraday bias in GBP/USD remains neutral as range trading continues. Further rise is still in favor with 1.3446 support intact. On the upside, firm break of 61.8% retracement of 1.3867 to 1.3158 at 1.3596 will pave the way to retest 1.3867 high. However, break of 1.3446 will turn bias back to the downside for deeper pullback.

In the bigger picture, current development suggests that price actions from 1.3867 are merely a corrective pattern within the broader up trend from 1.0351 (2022 low). With 1.3008 support intact, medium term bullishness is maintained and break of 1.3867 is back in favor for a later stage, towards 1.4248 key resistance (2021 high).

Daily Pivots: (S1) 0.7853; (P) 0.7883; (R1) 0.7923; More….

Intraday bias in USD/CHF stays neutral and outlook is unchanged. On the downside, below 0.7830 will turn bias to the downside for 0.7774 support. Sustained break of 61.8% retracement of 0.7603 to 0.8041 at 0.7770 will pave the way to retest 0.7603 low. However, decisive break of 0.7933 will argue that fall from 0.8041 has completed as a corrective move. Further rise should then be seen through 0.8041 to resume the whole rebound from 0.7603.

In the bigger picture, rebound from 0.7603 medium term bottom is seen as correcting the fall from 0.9200 only. Rejection by 55 W EMA (now at 0.8053) will affirm this bearish case, and setup down trend resumption to 100% projection of 1.0146 (2022 high) to 0.8332 from 0.9200 at 0.7382 at a later stage. Though, sustained break of 55 W EMA will suggest that it's probably correcting the larger scale down trend from 1.0146 (2022 high).

Daily Pivots: (S1) 159.12; (P) 159.45; (R1) 159.95; More...

USD/JPY's rally continues today and focus is now on 160.45 resistance. Firm break there will confirm larger rally resumption for 161.94 high next. On the downside, below 158.94 minor support will indicate that consolidation pattern from 160.45 is starting another down leg. But still, overall outlook will remain bullish as long as 157.49 cluster support (38.2% retracement of 152.25 to 160.45 at 157.31) holds. Upside breakout is just delayed in this case.

In the bigger picture, outlook is unchanged that corrective pattern from 161.94 (2024 high) should have completed with three waves at 139.87. Larger up trend from 102.58 (2021 low) could be ready to resume through 161.94. This will remain the favored case as long as 55 W EMA (now at 153.81) holds. Firm break of 161.94 will pave the way to 61.8% projection of 102.58 to 161.94 from 139.87 at 176.75.

USD/JPY is once again approaching the 160 level, putting markets on alert for potential Japanese intervention. The pair’s steady climb, driven by rising oil prices and widening rate differentials, is turning this level into a key flashpoint for global FX markets.

Yen’s weakness is not occurring in isolation. Oil prices have surged, with Brent breaking above $114 and WTI above $106, reinforcing inflation pressures globally. For Japan, a major energy importer, higher oil prices translate directly into currency weakness through deteriorating trade dynamics.

At the same time, higher energy costs are pushing yields up in major economies, widening the already significant rate gap with Japan. Even with the Bank of Japan’s recent hawkish shift, its policy rate remains far below global peers, leaving the Yen structurally disadvantaged.

This combination is driving USD/JPY higher toward the 160 threshold—a level widely seen as a "red line" for intervention. The key question now is whether markets will test that level aggressively or hesitate in anticipation of official action.

Japanese authorities have already stepped up rhetoric. Finance Minister Katayama warned again this week that the government is ready to take “bold action” against excessive currency moves. However, past experience shows that verbal intervention alone has limited impact without concrete follow-through.

The uncertainty lies in whether authorities will act decisively this time. Intervention at or near 160 could trigger a sharp reversal, particularly if markets are heavily positioned. But hesitation or delayed action could embolden traders to push the pair beyond the threshold.

Complicating the picture is the broader macro backdrop. Markets are currently in a holding pattern ahead of the FOMC decision, with traders reluctant to take strong positions. The Fed is widely expected to keep rates unchanged, and the lack of new projections suggests limited policy signals.

This has effectively delayed broader market reactions, including those to oil’s surge. Once the FOMC event risk is cleared, the focus could quickly shift back to yield differentials and oil-driven inflation pressures, reinforcing upward momentum in USD/JPY. In that scenario, the absence of intervention could accelerate gains.

For now, USD/JPY sits at a critical juncture. Whether it becomes a turning point or a launchpad for further gains will depend on a simple question—who blinks first: traders or Japan.

In the currency markets, for the week so far, Aussie is the strongest one, followed by Dollar, and then Loonie. Swiss Franc is the worst, followed by Kiwi, and then Yen. Euro and Sterling are positioning in the middle.

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USD/JPY Mid-Day Outlook

Daily Pivots: (S1) 159.12; (P) 159.45; (R1) 159.95; More...

USD/JPY's rally continues today and focus is now on 160.45 resistance. Firm break there will confirm larger rally resumption for 161.94 high next. On the downside, below 158.94 minor support will indicate that consolidation pattern from 160.45 is starting another down leg. But still, overall outlook will remain bullish as long as 157.49 cluster support (38.2% retracement of 152.25 to 160.45 at 157.31) holds. Upside breakout is just delayed in this case.

In the bigger picture, outlook is unchanged that corrective pattern from 161.94 (2024 high) should have completed with three waves at 139.87. Larger up trend from 102.58 (2021 low) could be ready to resume through 161.94. This will remain the favored case as long as 55 W EMA (now at 153.81) holds. Firm break of 161.94 will pave the way to 61.8% projection of 102.58 to 161.94 from 139.87 at 176.75.

Economic sentiment in Europe weakened sharply in April, with the Economic Sentiment Indicator falling from 96.7 to 93.5 in the EU and from 96.2 to 93.0 in the Eurozone. The decline marks a clear deterioration in business and consumer confidence, pushing both readings well below the long-term average of 100.

The drop was driven primarily by a collapse in consumer confidence, alongside weaker sentiment among services and retail trade managers. In contrast, confidence in construction and industry held broadly steady, suggesting that the downturn is currently concentrated in demand-sensitive sectors rather than production.

The Employment Expectations Indicator also deteriorated significantly, falling from 97.2 to 93.2 in the EU and from 96.3 to 91.7 in the Eurozone, highlighting growing concerns over the labor market outlook.

Among major economies, the deterioration was widespread. Germany led the decline with a 3.9-point drop, followed by France (-3.0), Italy (-2.8), and the Netherlands (-2.5), while Spain and Poland saw more moderate declines.

Full EU and Eurozone ESI release here.