The Canadian dollar weakened past 1.378 per USD in late May as weak economic data reinforced expectations of a dovish Bank of Canada. Canada's economy unexpectedly contracted in the first quarter of 2026 from a year earlier, marking a second consecutive quarter of annual decline and highlighting slowing domestic momentum. The data strengthened expectations that the BoC will keep interest rates unchanged, with markets broadly anticipating a hold at the June 10 meeting. Meanwhile, the Bank of Canada’s preferred core inflation measures slowed more than expected to their lowest levels in five years, signaling easing underlying price pressures outside the energy sector. The figures reinforced the central bank’s view that energy-driven inflation may prove temporary and further reduced the likelihood of additional rate hikes, weighing on the loonie.

Canadian Dollar Weakens on Soft GDP Data

The yield on Brazil’s 10-year government bond eased slightly to 14.13% at the end of May as oil prices fell to their lowest level in roughly six weeks, easing lingering energy-driven stagflation concerns. Signs emerged that the US and Iran may be moving closer to a formal agreement, with reports indicating that both sides have reached a preliminary understanding, although US President Donald Trump has yet to endorse the terms. The prospect of restored oil flows through the Strait of Hormuz helped ease global inflation concerns and pressured bond yields lower worldwide. On the other hand, stronger-than-expected domestic GDP data enforced expectations that the BCB will take a hawkish stance.

Brazil 10-Year Yield Eases as Oil Prices Retreat

The Brazilian real strengthened slightly to 5.03 per USD in late May as the US dollar softened and oil prices retreated. Signs emerged that the US and Iran may be closer to a formal agreement, with reports indicating that both countries have reached a preliminary understanding, although US President Donald Trump has yet to endorse the terms. The prospect of restored oil flows through the Strait of Hormuz eased global inflation concerns and weighed on the dollar. Domestically, stronger-than-expected GDP data reinforced expectations that the BCB will maintain a hawkish stance. Brazil’s economy grew 1.1% in the first quarter from the previous three months, accelerating from 0.3% in Q4 2025 and marking the strongest expansion in a year. The data supported expectations of higher-for-longer interest rates, boosting the attractiveness of Brazilian assets and underpinning demand for the real.

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Canadian Dollar Weakens on Soft GDP Data

Brazil 10-Year Yield Eases as Oil Prices Retreat

Brazil 10-Year Yield Eases as Oil Prices Retreat

BRL Strengthens Slightly on Strong GDP and Easing Oil Prices