Fed Holds Rates in Final Powell Meeting as Leadership Transition and Iran Tensions Drive Global Uncertainty

Today's expected range for the Canadian Dollar against the major currencies:

US Dollar        1.3490-1.3740

Euro                1.5860-1.6110

Sterling           1.8330-1.8580

WTI Oil (opening level) $95.15

The CAD/USD is opening at 1.3613 ( 0.7346 )

Central banks will take the spotlight this week.

The Bank of Canada (BoC) is expected to leave its monetary policy unchanged for the fourth consecutive time on Wednesday. The BoC is likely to note the higher inflationary pressures but will request more time to decide its monetary policy amid the uncertainty in the Middle East.

The US Federal Reserve (Fed) is likely to follow suit a few hours later. The market is fully pricing interest rates to remain on hold throughout 2026, according to the CME Fed Watch Tool, which also shows that there is a 66% chance that the central bank keeps its monetary policy steady in December this year. 

Wednesday’s Fed meeting is likely to be also the last of Jerome Powell as the bank’s chairman, as his term ends in May, and former Governor Kevin Warsh has been appointed to replace him. What is not clear is whether Powell will keep his chair at the Board of Governors or will definitely leave the bank, as Trump demands. The outcome of the Powell-Trump saga and the independence of the Fed are likely to remain an issue during the days following the meeting.

Headlines

• The Federal Reserve is widely expected to keep interest rates unchanged at its policy meeting starting Tuesday, as energy prices remain elevated and supply chains are disrupted due to the Middle East war. The meeting will be Chairman Jerome Powell's last at the helm of the institution as his term ends mid-May. A new monetary policy statement and Powell press conference are up on Wednesday.
• Friday, the US Department of Justice dropped its case against Fed Chair Powell, which had accused him of making false or misleading statements to Congress about the costs and other details related to the renovation of Federal Reserve headquarters. The dropping of this suit will likely accelerate the confirmation of Kevin Warsh as the next Fed Chair, as one Republican on the Senate Banking Committee, Thom Tillis, had vowed not to vote for Warsh until the case against Powell had been dropped, as he saw it as entirely politically motivated.
• Peace talks between the US and Iran stalled over the weekend after Trump cancelled a planned trip by his top envoys to Pakistan. Iran, while maintaining it will not negotiate under threat, has reportedly presented the US with a new proposal that could pave the way for reopening the Strait of Hormuz, with nuclear negotiations deferred to a later stage to sidestep internal divisions within the Iranian leadership. Trump is expected to hold a Situation Room meeting on Iran later today.
• U.S. year-ahead inflation expectations rose to 4.7% in April 2026 from 3.8% in March, just below the 4.8% preliminary reading, according to the University of Michigan survey. The five-year outlook edged up to 3.5%, the highest in six months, from a 3.4% preliminary estimate and 3.2% in March.
• The University of Michigan’s Consumer Sentiment Index was revised up to 49.8 in April 2026 from 47.6 but remains at a record low amid the Iran conflict and related price pressures. Inflation expectations rose sharply, with the one-year outlook at 4.7% (from 3.8%) and the long-term outlook at 3.5%, the highest since October 2025.

Key Points

• Equities: US chips led gains, Europe lagged on oil pressure, while Asia split between AI enthusiasm and energy-importer stress.
• Volatility: VIX near 19, Fed and earnings in focus, oil/geopolitical risk
• Digital Assets: BTC steady, ETH softer, IBIT inflows, ETHA mixed
• Fixed Income: Global yields edge higher with crude oil prices
• Currencies: USD soft as global risk sentiment remains strong despite rising oil prices
• Commodities: Oil grinds higher, gold stuck in neutral as US drought lifts wheat