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Canadian Dollar strengthens despite hawkish Fed expectations

  • USD/CAD softesn to near 1.4205 in Wednesday’s Asian session.
  • Iran’s Pezeshkian said no negotiation on ballistic missiles.
  • Traders raise their bets on a US rate hike this year.

The USD/CAD pair edges lower to around 1.4205 during the Asian trading hours on Wednesday. Nonetheless, the potential downside for the pair might be limited amid rising expectations of a Federal Reserve (Fed) rate hike this year. The US May Personal Consumption Expenditures (PCE) Price Index (PCE) data will take center stage later on Thursday. 

Iran’s President Masoud Pezeshkian said on Tuesday that Tehran’s ballistic missile program will not be included in negotiations with the United States (US), per BBC.

US President Donald Trump rebuffed Iran’s claim that no visit has been scheduled for International Atomic Energy Agency (IAEA) inspectors, insisting Tehran had already agreed to the arrangement. Uncertainty surrounding US-Iran peace deal could support the US Dollar (US) against the Canadian Dollar (CAD).

Markets adjusted expectations for a more hawkish stance from the Fed, lifting the Greenback. Traders are now pricing in nearly a 86.1% chance of a Fed hike in December, up from 61% before last week’s FOMC meeting, according to the CME FedWatch tool.

The Bank of Canada (BoC) Governor Tiff Macklem said on Tuesday that global imbalances of financial flows, led by China’s export surplus and the reliance of the United States on foreign capital, and ‌may be fuelling financial stability risks.”

The Loonie has been on the backfoot for several weeks with well-documented reasoning of widening yield differentials in favor of the USD, slowing growth, trade uncertainty or the uneasy status quo and a mostly asymmetric risk response to the Iran war,” said Amo Sahota, director at Klarity FX in San Francisco.

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Euro strengthens against Canadian Dollar as oil prices decline

  • EUR/CAD rises as the commodity-linked Canadian Dollar weakens following a drop in crude prices triggered by successful US-Iran talks.
  • Qatar and Pakistan agreed to a 60-day roadmap to secure a final peace agreement, per a joint statement.
  • Traders closely await ECB President Lagarde’s highly anticipated speech later on Monday for potential monetary policy clues.

EUR/CAD extends its gains for the second successive day, trading around 1.6260 during the Asian hours on Monday. The currency cross appreciates as the commodity-linked Canadian Dollar (CAD) loses ground amid lower oil prices, given Canada’s status of the largest crude exporter to the United States (US).

West Texas Intermediate (WTI) oil price declines nearly 2%, trading around $75.00 per barrel at the time of writing. Crude oil prices depreciated following the successful conclusion of US-Iran talks in Switzerland, effectively easing global market anxieties regarding a potential supply shortage. A key driver of this market relief was Tehran’s announcement that it had successfully secured critical waivers for its oil and petrochemical exports.

Complementing the diplomatic breakthrough, mediators Qatar and Pakistan released a joint statement from Switzerland confirming that both nations have agreed to a formal, structured roadmap aimed at securing a final peace agreement within the next 60 days.

Providing further details on the negotiations, Iranian Foreign Minister Abbas Araqchi confirmed that the diplomatic progress yielded several major concessions for his country. In addition to the vital export waivers for oil and petrochemicals, the agreed-upon terms include the release of a portion of Iran’s frozen financial assets, alongside the official launch of a comprehensive domestic reconstruction and development plan.

On the macroeconomic front, European Central Bank (ECB) policymaker and Belgian central bank head Pierre Wunsch indicated on Friday that the central bank may implement one more interest rate hike as early as next month. This potential monetary tightening depends on whether the ECB observes further evidence of Eurozone inflation spreading beyond the energy sector into the broader economy. Market participants are now closely watching ECB President Christine Lagarde, who is scheduled to deliver a highly anticipated speech later in the day.

Euro Price Today

The table below shows the percentage change of Euro (EUR) against listed major currencies today. Euro was the strongest against the Canadian Dollar.

USDEURGBPJPYCADAUDNZDCHF
USD0.15%0.24%0.23%0.25%0.13%0.18%0.11%
EUR-0.15%0.09%0.07%0.09%0.03%0.06%-0.03%
GBP-0.24%-0.09%-0.02%-0.00%-0.07%-0.03%-0.11%
JPY-0.23%-0.07%0.02%0.02%-0.09%-0.05%-0.10%
CAD-0.25%-0.09%0.00%-0.02%-0.12%-0.09%-0.12%
AUD-0.13%-0.03%0.07%0.09%0.12%0.06%-0.02%
NZD-0.18%-0.06%0.03%0.05%0.09%-0.06%-0.06%
CHF-0.11%0.03%0.11%0.10%0.12%0.02%0.06%

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent EUR (base)/USD (quote).

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Canadian Dollar hits 14-month lows due to safe-haven demand, lower oil prices

  • USD/CAD reached a 14-month high of 1.4191 on Monday.
  • The Greenback rises on increased safe-haven demand amid renewed US-Iran peace deal concerns.
  • The Canadian Dollar falls as Oil prices drop following a 60-day US-Iran peace roadmap brokered by Qatar and Pakistan.

USD/CAD extends its gains for the fifth successive day, trading around 1.4190 during the Asian hours on Monday. The pair hits a 14-month high of 1.4191 as the US Dollar (USD) receives support from safe-haven demand, which could be attributed to renewed concerns over a US-Iran peace deal. Traders will likely observe Canada’s Consumer Price Index (CPI) data due later in the North American session.

CNBC reported on Sunday that US President Donald Trump threatened direct strikes on Iran if Hezbollah continues its attacks on Israel. This warning has severely clouded the outlook for diplomatic progress between Washington and Tehran, completely dismantling the current peace framework, even as Vice President JD Vance met with Iranian officials for the first round of talks under an interim deal.

Meanwhile, Tehran simultaneously announced it had once again closed the strategic Strait of Hormuz. While Iranian state media reported that Tehran had completely suspended negotiations in response to Trump’s remarks, sources close to the matter indicated that discussions are quietly ongoing.

Moreover, the Greenback receives support as the Federal Reserve (Fed) adopted a decidedly hawkish tone after keeping interest rates steady last week. Notably, 9 out of 19 Fed policymakers now project at least one interest rate hike this year, with market investors pricing in a potential increase as early as September.

As Canada’s largest crude exporter to the United States (US), the commodity-linked Canadian Dollar (CAD) faced downward pressure from falling oil prices. Crude surrendered its daily gains following positive developments in the US-Iran peace talks. Mediators Qatar and Pakistan announced in a joint statement from Switzerland that both nations have agreed to a formal roadmap aimed at securing a final peace agreement within the next 60 days.

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The Canadian Dollar ditches Crude Oil for Gold

  • USD/CAD pushed to a fresh 14-month high this week, dragging the Loonie to its weakest against the Greenback since early 2025.
  • The slide defies firm Crude Oil prices; the Loonie’s traditional link to Crude Oil has broken down and even turned negative.
  • The real drivers are a widening Canada-US rate gap and a six-week slide in Gold.

The textbook calls the Canadian Dollar a petro-currency, which means that with a Middle East war keeping Crude Oil bid, the Loonie should be holding its own. Instead it spent this week sliding to a fresh 14-month low against the Greenback, capping a run in which the US Dollar has closed higher in six of the last seven weeks. The textbook is wrong, at least for now: the Loonie has quietly stopped trading like a Crude Oil proxy, with its weakness driven by two forces that have nothing to do with the price of a barrel.

A petro-currency in name only

For years the Loonie moved with the price of a barrel; that relationship has quietly inverted. The rolling correlation between daily moves in the currency and Crude Oil has turned negative in recent months, a clean break from the historical norm. In its place, a less obvious driver has taken over: Gold. Canada is a major bullion producer; with Gold down for six straight weeks and well off its recent record, that slide has become a genuine weight on the currency. The market has swapped one commodity anchor for another; traders still watching only the barrel have missed it.

Two central banks moving apart

The second force is the one doing most of the damage: a widening gap between the Federal Reserve (Fed) and the Bank of Canada (BoC). The Fed held at 3.75% this month and revised its dot plot higher, with markets pricing a possible 2026 hike; the BoC, at 2.25%, is going nowhere. It held again this month, caught in a two-way bind between a soft domestic economy and fresh, energy-driven inflation, and has signalled no intention of moving. When one central bank is leaning toward hikes and the other is frozen, the rate spread does the talking; right now it points squarely against the Loonie. Speculative short positions on the currency have climbed to their highest in months as a result.

Outgunned, but not without a say

What makes the move striking is that this is not simply a story about Canada falling apart. The domestic picture is mixed rather than broken: a strong May jobs report sits alongside Friday’s soft retail sales; the Loonie’s slide owes more to relative positioning than to outright collapse. That also means the currency has a busier week ahead than the bears might like.

Canada’s own May Consumer Price Index (CPI) lands Monday at 12:30 GMT. With inflation already running near 3% on elevated energy costs, a hot print would feed the BoC’s inflation side and could lend the Loonie a rare bid; Governor Macklem then speaks Tuesday. The dominant event still sits south of the border: on Thursday at 12:30 GMT the US delivers its first-quarter Gross Domestic Product (GDP) third estimate alongside the May Personal Consumption Expenditures Price Index (PCE), with core PCE seen accelerating to 0.3% MoM. A hot US PCE widens the rate gap further and points USD/CAD higher still; only a genuinely hot Canadian CPI on Monday gives the Loonie much to fight back with.

Resistance: USD/CAD is pressing the 1.4200 handle after this week’s run; a clean break opens 1.4250 and then 1.4300, levels last seen well over a year ago.

Support: Initial support sits near 1.4100, then 1.4050; only a move back below 1.4000 would suggest the Loonie has found real footing.

Bias: Higher for USD/CAD while the Fed-BoC gap widens and Gold stays heavy, meaning further Loonie weakness is the base case. The one caution is positioning: the daily Stochastic Relative Strength Index (Stoch RSI) is deep in overbought after a near-vertical climb; a sharp but shallow pullback toward 1.4100 would not surprise. A hot US PCE next week is the catalyst most likely to push the pair on toward 1.4250.

USD/CAD hourly chart

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Canadian Dollar dips as Fed hawkish outlook, weaker Oil pressure CAD

  • USD/CAD rises 0.21% on Thursday and trades around 1.4130 at the time of writing.
  • The US Dollar remains supported after a hawkish Fed meeting, despite the preliminary US-Iran agreement.
  • Lower Oil prices emphasise downside pressure on the Canadian Dollar.

USD/CAD trades around 1.4130 on Thursday, up 0.21% on the day, as the US Dollar (USD) maintains a positive tone following the Federal Reserve’s (Fed) monetary policy decision. The pair continues to hold above the 1.4100 level, supported by a reassessment of US interest rate expectations.

The Fed left its benchmark interest rate unchanged within the 3.5%-3.75% range, in line with market expectations. However, updated economic projections showed that roughly half of Federal Open Market Committee (FOMC) members expect at least one additional rate hike this year. During his first press conference as head of the central bank, Fed Chair Kevin Warsh reaffirmed his commitment to restoring price stability, highlighting the resilience of the labor market and persistent underlying inflation pressures.

This more restrictive policy outlook continues to support the Greenback, even as safe-haven demand eases following the announcement of a preliminary memorandum of understanding between the United States (US) and Iran aimed at ending hostilities in the Middle East. According to Rabobank, improving geopolitical prospects and a potential full reopening of the Strait of Hormuz could reduce demand for safe-haven assets, but the impact of the Fed’s hawkish shift is currently outweighing those factors for the US Dollar.

On the Canadian side, the Canadian Dollar (CAD) is weighed down by lower Oil prices. West Texas Intermediate (WTI) is hovering below $75 per barrel, down more than 0.90% on Thursday at the time of press. This factor is generally negative for the commodity-linked currency, given the importance of energy exports to the Canadian economy.

At the same time, investors remain focused on the global growth outlook and the potential consequences of higher US interest rates. A further rise in US Treasury yields could continue to favor the US Dollar against the Canadian Dollar, even as overall market sentiment improves.

Canadian Dollar Price Today

The table below shows the percentage change of Canadian Dollar (CAD) against listed major currencies today. Canadian Dollar was the strongest against the Swiss Franc.

USDEURGBPJPYCADAUDNZDCHF
USD0.33%0.47%0.16%0.16%0.11%0.13%0.56%
EUR-0.33%0.16%-0.15%-0.17%-0.23%-0.25%0.22%
GBP-0.47%-0.16%-0.32%-0.33%-0.37%-0.39%0.05%
JPY-0.16%0.15%0.32%0.02%-0.06%-0.08%0.38%
CAD-0.16%0.17%0.33%-0.02%-0.08%-0.09%0.37%
AUD-0.11%0.23%0.37%0.06%0.08%-0.02%0.44%
NZD-0.13%0.25%0.39%0.08%0.09%0.02%0.47%
CHF-0.56%-0.22%-0.05%-0.38%-0.37%-0.44%-0.47%

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Canadian Dollar from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent CAD (base)/USD (quote).

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Canadian Dollar softens on strong US PPI data, US-Iran peace deal uncertainty

  • USD/CAD edges higher to around 1.3980 in Friday’s early Asian session. 
  • The annual US PPI inflation rate was the highest since November 2022. 
  • BoC left the interest rates unchanged at its June meeting on Wednesday. 

The USD/CAD pair gains traction to near 1.3980 during the early European trading hours on Friday, bolstered by hot US inflation data. Traders will closely monitor the developments surrounding the US-Iran peace deal. The preliminary reading of the Michigan Consumer Sentiment Index for June is due later on Friday. 

Data on Thursday showed US Producer Price Index (PPI) inflation rose more than expected in May, leading to the largest annual gain in three and a half years as the Middle East conflict drove up the cost of energy products.

The Fed is clearly missing its inflation target by a lot more than it is missing its employment objective,” said John Ryding, chief economic advisor at Brean Capital. “The PPI report should further embolden those on the FOMC who think a rate hike might be needed later in the year,” Ryding added. 

US President Donald Trump said on Thursday that the US and Iran could sign a peace deal as soon as this weekend that would reopen the Strait of Hormuz to shipping. Iran countered that it had not reached a final decision on an agreement. However, uncertainty remains high amid ongoing tensions in the Middle East. 

US forces intercepted and shot down two Iranian one-way attack drones near the Strait of Hormuz on Thursday after Iran attempted to target commercial vessels transiting the waterway, per Fox News. The Islamic Revolutionary Guard Corps (IRGC) said that the country is stronger than ever and ready to deliver a “decisive, immediate, painful and regret-inducing response” to any aggression.

On the Loonie front, the Bank of Canada (BoC) on Wednesday decided to hold its key interest rate unchanged as expected and said it was ‌seeing limited evidence that higher energy prices were fueling broad-based inflation.

Nonetheless, BoC Governor Tiff Macklem reiterated that the bank would not hesitate to raise rates if need be to keep inflation in check. “The Governing Council is continuing to look through the war’s near-term impact on headline inflation but will not let higher energy prices become persistent inflation,” according to the BoC statement. 

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Canadian Dollar advances as Middle East uncertainty weighs on US Dollar

  • USD/CAD falls as the US Dollar pauses ahead of Middle East updates and crucial Fed policy data.
  • A hot US inflation report solidified expectations for a “higher-for-longer” Federal Reserve interest rate environment.
  • The Canadian Dollar may weaken as falling oil prices follow reports of the US completing military strikes in Iran.

USD/CAD loses ground for the third successive day, trading around 1.3940 during the Asian hours on Thursday. The pair depreciates as the US Dollar (USD) holds losses as investors assess ongoing Middle East tensions with anticipation of upcoming US economic data, which could signal the Federal Reserve’s next policy moves.

The Greenback may regain its ground amid rising safe-haven demand due to the ongoing Middle East conflict. Israeli military says that the Home Front Command, the branch of the Israel Defense Forces (IDF) responsible for civil defense, issued an early warning after launches from Lebanon toward northern Israel.

The US Dollar (USD) gained ground after a hot inflation report released on Wednesday, which effectively solidified expectations for a “higher-for-longer” interest rate environment from the Federal Reserve. Driven primarily by war-induced energy price spikes, US inflation accelerated in May to its fastest pace in over three years. %. Traders await the upcoming release of the May Producer Price Index (PPI) and Initial Jobless Claims later today.

The US Consumer Price Index (CPI) rose 4.2% year-over-year and 0.5% monthly, both perfectly matching market forecasts. Meanwhile, core CPI, which strips out volatile food and energy costs, climbed 0.2% on the month and 2.9% annually. Following the data release, financial markets aggressively pivoted, abandoning any remaining expectations for Fed rate cuts this year.

The downside of the USD/CAD pair could be restrained as the commodity-linked Canadian Dollar (CAD) may face challenges amid lower oil prices, given Canada’s status as the largest crude exporter to the United States (US).

West Texas Intermediate (WTI) oil holds losses near $89.50 per barrel at the time of writing. Crude oil prices eased after the US military announced it had completed its latest strikes on Iran, raising hopes that peace negotiations could resume and tempering oil supply concerns.

Earlier, the US launched fresh attacks on Iran after President Trump accused Tehran of delaying talks on an interim peace agreement, while Iran reportedly responded by targeting US vessels in the Strait of Hormuz.

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Canadian Dollar drops to two-month low vs USD as Fed-BoC gap counter higher Oil prices

  • USD/CAD retains a bullish bias and continues to draw support from a combination of factors.
  • Domestic growth concerns and the divergent BoC-Fed expectations undermine the Loonie.
  • Geopolitical risks benefit the safe-haven USD and further offer some support to spot prices.

The USD/CAD pair climbs to a nearly two-week high during the Asian session on Thursday, with bulls now looking to build on the positive momentum further beyond the 1.3900 mark.

The Canadian Dollar (CAD) continues with its relative underperformance against the US Dollar amid slowing domestic growth, a softening labor market, and interest rate divergence between the Bank of Canada (BoC) and the US Federal Reserve (Fed). In fact, Canada faced consecutive quarters of economic contraction during the January-March 2026 period, confirming a technical recession. Adding to this, rising unemployment and weakening consumer demand could force the BoC to adopt a more dovish stance.

In contrast, traders are currently assigning over a 50% chance that the Fed will raise interest rates in 2026 amid sticky inflation. This, along with persistent geopolitical uncertainties, acts as a tailwind for the safe-haven USD and continues to offer some support to the USD/CAD pair. In the latest development surrounding the Middle East conflict, the US military said on Tuesday that it had intercepted and defeated a series of Iranian missile and drone attacks targeting regional neighbors – Kuwait and Bahrain.

Furthermore, the lack of a breakthrough in US-Iran diplomatic negotiations, amid a standoff over Tehran’s nuclear program and the Strait of Hormuz, keeps geopolitical risks in play. This, in turn, assists Crude Oil prices in preserving weekly gains registered over the past three days, which helps limit further losses for the commodity-linked Loonie. Adding to this, the Israel-Lebanon agreement on the implementation of a ‌ceasefire keeps a lid on the safe-haven USD and contributes to capping the upside for the USD/CAD pair.

Investors also seem hesitant and opt to wait for the release of monthly employment details from the US and Canada on Friday. The crucial US Nonfarm Payrolls (NFP) report will be looked for more cues about the Fed’s policy path, which, along with the incoming geopolitical headlines, will drive the USD demand. Moreover, Crude Oil price dynamics should provide a fresh impetus to the USD/CAD pair. Nevertheless, the fundamental backdrop suggests that the path of least resistance for spot prices is to the upside.