USD/CAD is firm in the 1.26 area on a strong US dollar

• USD/CAD holds in the 1.26 area on a firm US dollar. 
• The dovish ECB has seen the divergence between the Fed and ECB send flows into the greenback. 

At 1.2606, USD/CAD is up 0.10% on the day, little changed although in recovery mode from its weakest level in nearly four weeks and the US dollar has printed another fresh cycle high in the DXY. The index rose to a fresh cycle high of 100.761 with the euro falling to a low of 1.0757 on the back of a dovish European Central Bank.

Also supportive of the US dollar, New York Fed President John Williams said on Thursday that the US Federal Reserve should reasonably consider raising interest rates by a half percentage point at its next meeting in May. 

Meanwhile, at Thursday's meeting, the ECB reconfirmed a decision taken five weeks ago, in a broadly unchanged decision statement. ''That means that APP purchases will be conducted at a pace of EUR40bn/EUR30bn/EUR20bn in April/May/June, respectively, and net purchases to end in Q3, without a pre-specified purchase level for Q3,'' analysts at Danske Bank said.

''Christine Lagarde conveyed a message of not being in a rush to tighten policies as the economic activity (which is set to become weaker amid high uncertainty) outweighs the concerns about the outlook for extended high inflation, even though Lagarde seemed concerned about medium-term inflation expectations in particular surveys,'' the analysts at Danske Bank went on to explain. ''Therefore, we are slightly surprised about the messages sent during the press conference in light of its primary mandate.''

As for the Bank of Canada, it accelerated its tightening cycle this week, building on March’s 25 bp rate hike with a larger, 50 bp move that lifts the overnight rate to 1%. The bank also said it will begin shrinking its balance sheet by ceasing reinvestment of maturing GoC holdings. 

Elsewhere, being one of Canada's major exports, the price of crude oil ended at around $104.15 spot a barrel as Russian oil production fell to 2020 lows. OPEC also warned the prior day that it would be impossible to replace potential supply losses from Russia.