- USD/CAD rallies further to near 1.3830 as investors remain on edge amid Middle East conflicts.
- The Fed is unlikely to deliver any dovish monetary policy adjustment this year.
- Higher oil prices are expected to keep the Canadian Dollar broadly on the front foot.
The USD/CAD pair extends its winning streak for the fourth trading day on Thursday and jumps to near 1.3830 during the Asian trading session, the highest level seen in two months.
The Loonie pair trades firmly as the US Dollar (USD) rises amid uncertainty surrounding the war in the Middle East, which involves the United States (US), Israel, and Iran. As of writing, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, holds onto Wednesday’s gains around 99.65.
The safe-haven demand of the US Dollar remains firm as Iran continues to push back hopes of de-escalation in Middle East conflicts, stating that it is not directly involved in negotiations with the US.
Regarding the month-long ceasefire proposal and 15-point settlement plan, Iran said that the Pakistan-delivered proposal was excessive and demanded sovereignty over the Strait of Hormuz. A senior Iranian official said talks could be held in Pakistan or Turkey if they proceed, Reuters reports.
On the domestic front, traders remain confident that the Federal Reserve (Fed) will not cut interest rates this year, as surging energy prices have de-anchored inflation expectations.
Meanwhile, the Canadian Dollar (CAD) underperforms its major currency peers, except antipodeans, as investors remain on edge amid the Middle East war. However, the broader outlook of the Loonie remains firm amid higher oil prices.
Given that Canada is a net oil exporter, higher oil prices due to an energy supply shock is a favorable situation for the Canadian Dollar.