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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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Trade of The Day – NOK/SEK

  • The NOKSEK closing price has remained below the 23.6% Fibonacci retracement level (measured from January 13 to May 15) for the last five consecutive sessions.
  • The exchange rate failed to return above the middle Bollinger Band on the 14-day timeframe, despite yesterday’s declaration from Norges Bank indicating its intention to hike interest rates in the coming months.
  • Crude oil futures (OIL) have lost approximately 7.5% since the beginning of the week.

Recommendation

  • Position: Short (SELL) on NOKSEK at market price
  • Target Price (Take Profit; TP): 0.9740 (TP1), 0.9620 (TP2)
  • Stop Loss (SL): 0.9970

Source: xStation5

Opinion

NOKSEK broke its upward trend alongside the de-escalation of the Middle East conflict due to its tight correlation with oil prices (Norway remains one of the key net exporters of the commodity). The cross also failed to react significantly to the hawkish rhetoric from Norges Bank, which announced interest rate hikes in the coming months in the face of elevated CPI inflation (3.1% in May 2026). The rate remains in a downward trend (consistently trading between the middle and lower Bollinger Bands on the 14-day interval) despite the recent widening of the yield spread between 2-year Norwegian and Swedish government bonds.

This suggests that the exchange rate’s correlation with oil prices and the fading geopolitical risk premium remain the dominant drivers. Upside for the NOK may also be capped by the broader macroeconomic outlook—Norges Bank projects elevated inflation above target until 2029, alongside the risk of unemployment rising to pre-pandemic levels. Conversely, forecasts for Sweden point to accelerating GDP growth (1.8% in 2026 and 2.2% in 2027; source: Eurostat) combined with falling inflation below 2% (1.5% in 2026 and 1.8% in 2027; source: Eurostat).

Methodology

This recommendation was prepared based on a technical analysis of the NOKSEK chart, a fundamental analysis of the respective economies (monetary policy in Norway and Sweden), and the exchange rate’s correlation with crude oil prices. The directional bias of the recommendation was determined using Bollinger Bands. Take Profit and Stop Loss levels were established using Fibonacci retracements and price action (TP1 and TP2 at the 38.2% and 50.0% Fibo levels of the latest upward wave; SL placed at the resistance of the last rebound prior to the trend reversal).

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Chart of the day: GBP/CHF snaps back on retail sales recovery

The British pound is regaining momentum at the end of the week, driven by a stronger-than-expected batch of UK economic data.

This surprise surge in retail sales successfully halted sterling’s broad decline against most G10 currencies. Leading the recovery is the GBP/CHF pair, which broke cleanly above key moving averages to cement the pound’s robust positioning across Europe this Friday.

GBPCHF is exhibiting a bullish outlook, rebounding firmly to 1.0651 after finding support near the 38.2% Fibonacci level. The pair trades cleanly above its 10, 30, and 100-day EMAs, saving the upward trend. With the RSI at 56.7, there is plenty of room for further gains toward recent local highs. Source: xStation5

What’s Driving GBPCHF Today?

  • Sales Surprise on the Upside: Driven by the joint-third warmest May on record and retail promotions, UK retail sales volumes jumped 1.2% in May 2026, bouncing back from a 1.0% decline in April. This growth significantly outperformed economists’ forecasts, with annual sales rising 3.2%. Department and online stores performed particularly well, boosting the online sales share to 28.8%, though overall volumes still remain 0.4% below their pre-pandemic February 2020 levels.
  • Fragile Trend Sustainability: Over the three months to May 2026, sales volumes edged up 0.4%, supported by strong demand for tech products and outdoor items. However, long-term consumer confidence remains fragile. Shoppers are showing caution regarding big-ticket purchases due to cost-of-living pressures and geopolitical uncertainty surrounding the conflict in Iran. Major supermarket groups like Tesco and Morrisons have already noted a distinct slowdown in sales growth since this conflict began.
  • Burnham’s Turning Point: Greater Manchester Mayor Andy Burnham’s decisive parliamentary victory in Makerfield has cleared the way for a potential challenge against the deeply unpopular Prime Minister Keir Starmer, threatening fresh political instability in the UK. Positioned as a prime minister-in-waiting and heavily favored by party members, Burnham’s win severely weakens Starmer—who already faces resignation calls from a quarter of his lawmakers—and sets the stage for a high-stakes battle over the future direction of the Labour government.
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Swiss Franc weakens as traders ‌ramp up US rate hike bets, Vance canceled trip to talks with Iran

  • USD/CHF extends its upside to near 0.8075 in Friday’s early European session. 
  • US Vice President JD Vance pulled out of a planned trip to Switzerland for talks with Iran. 
  • SNB left its key interest rate at 0%, with a focus on currency risks. 

The USD/CHF pair advances to around 0.8075, the highest since December 10, 2025, during the early European session on Friday. The US Dollar (USD) strengthens against the Swiss Franc (CHF) as the Federal Reserve (Fed) officials left interest rates unchanged at its June policy meeting and signaled the possibility of higher rates later this year. 

Hawkish signals from the Fed provide some support to the Greenback. On Wednesday, the US central bank decided to hold its benchmark interest rate steady between 3.50% and 3.75% after Kevin Warsh’s first meeting in charge of the central bank. Warsh said during the press conference that “price stability” would be the Fed’s guiding principle.

Futures traders have priced in that the Fed is likely to raise rates by 25 basis points (bps) at its September meeting, with some chance seen of a move as soon as next month’s meeting. 

On the geopolitical front, US Vice President JD Vance cancelled a planned trip to meet Iranian negotiators in Switzerland to begin complex talks on implementing a 14-point agreement struck between Tehran and Washington to end their war. Traders will closely watch the US-Iran peace deal developments. Uncertainty in the Middle East could underpin the USD against the CHF in the near term. 

The Swiss National Bank (SNB) left its main policy rate unchanged at 0% on Thursday, as widely expected by markets, keeping borrowing costs well below those seen in other major economies. The SNB also said that it is ready to intervene in foreign exchange markets if a rebound in demand for the safe-haven franc drives the currency higher.

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New Zealand Dollar drops to fresh low since April as hawkish Fed bets support USD

  • NZD/USD remains on the defensive as the Fed’s hawkish tilt continues to underpin the USD.
  • US Vice President JD Vance cancels his trip for talks with Iran, keeping a lid on the optimism.
  • Bets for more aggressive RBNZ rate hikes could support the NZD and limit losses for the pair.

The NZD/USD pair turns lower for the third straight day following a modest Asian session uptick to the 0.5775 region and touches a fresh low since April 8 in the last hour. Spot prices currently trade just below mid-0.5700s and seem poised to register heavy weekly losses amid a bullish US Dollar (USD).

The USD Index (DXY), which tracks the Greenback against a basket of currencies, preserves its recent strength to the highest level since May 2025 in the face of the US Federal Reserve’s (Fed) hawkish tilt. In fact, policymakers projected the fed funds rate at 3.8% by the end of this year, up from 3.4% in March, implying at least one 25-basis-point (bps) rate hike in the coming months. This, to a larger extent, overshadows the US-Iran peace deal and continues to underpin the buck, which, in turn, is seen acting as a headwind for the NZD/USD pair.

Meanwhile, CNN reported that US Vice President JD Vance canceled his trip to talks with Iran in Switzerland. This further keeps a lid on the latest optimism and turns out to be another factor supporting the Greenback. However, the Reserve Bank of New Zealand’s (RBNZ) hawkish shift might hold back traders from placing aggressive bearish bets around the New Zealand Dollar (NZD) and limit losses for the NZD/USD pair. In fact, the RBNZ indicated that the OCR could reach roughly 2.85% by the end of this year, implying up to three rate hikes.

Moving ahead, the liquidity and trading volumes could remain low in the face of a US bank holiday in observance of Juneteenth National Independence Day. This further makes it prudent to wait for strong follow-through selling before positioning for an extension of the recent retracement slide from the vicinity of the 0.6000 psychological mark, or the May monthly swing high.

US Dollar Price This week

The table below shows the percentage change of US Dollar (USD) against listed major currencies this week. US Dollar was the strongest against the British Pound.

USDEURGBPJPYCADAUDNZDCHF
USD1.04%1.60%0.66%1.11%0.55%1.41%1.14%
EUR-1.04%0.52%-0.37%0.06%-0.51%0.36%0.09%
GBP-1.60%-0.52%-1.06%-0.44%-1.04%-0.17%-0.44%
JPY-0.66%0.37%1.06%0.45%-0.11%0.79%0.47%
CAD-1.11%-0.06%0.44%-0.45%-0.60%0.33%0.02%
AUD-0.55%0.51%1.04%0.11%0.60%0.88%0.60%
NZD-1.41%-0.36%0.17%-0.79%-0.33%-0.88%-0.27%
CHF-1.14%-0.09%0.44%-0.47%-0.02%-0.60%0.27%

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 US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).

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GBP slides to fresh low since April vs bullish USD amid UK political crisis

  • GBP/USD prolongs its downtrend for the third straight day amid a combination of negative factors.
  • The UK political turmoil undermines the GBP amid reduced bets for aggressive rate hikes by the BoE.
  • The Fed’s hawkish tilt and the Iran uncertainty boost the USD, further exerting pressure on the pair.

The GBP/USD pair attracts some follow-through selling for the third straight day and weakens further below the 1.3200 mark, hitting a fresh low since April during the Asian session on Friday. Spot prices remain on track to register heavy weekly losses, and the fundamental backdrop suggests that the path of least resistance remains to the downside.

The British Pound (GBP) continues with its relative underperformance in the wake of lingering domestic political risks, which, along with a bullish US Dollar (USD), validates the near-term negative outlook for the GBP/USD pair. Greater Manchester Mayor Andy Burnham cleared a path to attempt to oust British Prime Minister Keir Starmer after winning a parliamentary seat in northern England on Friday. In his victory speech, Burnham said the result could be a “turning point” for British politics and told his party that this was a final chance to change direction.

Meanwhile, traders have scaled back expectations for more aggressive interest rate hikes by the Bank of England (BoE) following the release of softer inflation figures earlier this week. Furthermore, the US-Iran peace deal eased concerns about the energy shock, endorsing the view that the BoE will hold interest rates steady. This is seen as another factor undermining the GBP. The USD, on the other hand, stands firm near its highest level since late March amid the US Federal Reserve’s (Fed) more hawkish tilt, signaling the possibility of at least one rate hike by the year-end.

On the geopolitical front, US Vice President JD Vance canceled his planned trip for talks with Iran in Switzerland, saying that the meeting wasn’t yet finalized. Adding to this, Israeli air strikes in Lebanon threaten to unravel the US-Iran deal. This further benefits the safe-haven USD and backs the case for an extension of the GBP/USD pair’s steep downfall from the weekly swing high, near the 1.3460 region. This, in turn, suggests that any attempted recovery could be seen as a selling opportunity as traders now look to UK monthly Retail Sales data for a fresh impetus.

Pound Sterling Price This week

The table below shows the percentage change of British Pound (GBP) against listed major currencies this week. British Pound was the strongest against the New Zealand Dollar.

USDEURGBPJPYCADAUDNZDCHF
USD1.17%1.70%0.74%1.14%0.66%1.61%1.32%
EUR-1.17%0.50%-0.42%-0.03%-0.53%0.43%0.14%
GBP-1.70%-0.50%-1.09%-0.52%-1.03%-0.07%-0.35%
JPY-0.74%0.42%1.09%0.39%-0.10%0.89%0.56%
CAD-1.14%0.03%0.52%-0.39%-0.52%0.50%0.16%
AUD-0.66%0.53%1.03%0.10%0.52%0.96%0.69%
NZD-1.61%-0.43%0.07%-0.89%-0.50%-0.96%-0.28%
CHF-1.32%-0.14%0.35%-0.56%-0.16%-0.69%0.28%

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 British Pound from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent GBP (base)/USD (quote).

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Dollar Towers on Hawkish Fed Signals

The dollar index traded around 100.8 on Friday, hovering at its highest level since May 2025 as investors piled on rate hike bets this year following hawkish signals from the Federal Reserve. On Wednesday, the Fed left rates unchanged as widely expected, but roughly half of FOMC members now anticipate at least one rate increase in 2026. The central bank also raised its inflation projections to account for the economic effects of the conflict in the Middle East. Chair Kevin Warsh declined to provide guidance on the next policy move but reaffirmed the Fed’s commitment to restoring price stability. Meanwhile, the US-Iran interim peace agreement took effect on Thursday, bringing an end to a prolonged conflict that triggered a historic disruption to global energy supplies. While the deal helped ease geopolitical risks and pushed oil prices lower, markets remained focused on the Fed’s policy outlook and the prospect of tighter monetary conditions.

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Chart of the Day – A New Era at the Fed and the Hawkish Shadow of the ECB. EUR/USD at a Turning Point

EURUSD starts today’s session in a noticeably tense yet somewhat uneven atmosphere, where the market lacks a single dominant narrative. On one side, investors are already looking ahead to the evening and the Federal Reserve’s decision, which could set the tone for the US dollar over the coming weeks. On the other side, Europe refuses to fade into the background, as fresh inflation data once again highlights that the ECB story and its future policy response to price pressures remain unresolved.

In practice, EURUSD is trading in an environment where no clear narrative has taken control. Market participants are simultaneously trying to price in the Fed, the ECB, and the widening divergence between them, which naturally increases volatility and means that any new impulse can quickly shift the balance of forces. In such a setup, the currency pair becomes particularly sensitive to changes in expectations, especially on a day filled with major macroeconomic events.

Source: xStation5

What is driving EURUSD today? Kevin Warsh’s debut and the Fed credibility test

Today’s Federal Reserve meeting carries special significance as it is the first under the leadership of Kevin Warsh. Markets are almost fully aligned in expecting interest rates to remain unchanged in the 3.50–3.75% range, but the decision itself is not the key focus. Far more important will be the tone of communication and how the new Fed Chair outlines the future path of monetary policy. Warsh takes control at a time when US inflation remains sticky and the economy continues to show relative resilience, limiting room for an early policy easing cycle. This makes today’s message potentially a directional signal for the entire Fed cycle. Even a subtle shift toward a more hawkish stance could strengthen the US dollar and add downward pressure on EURUSD.

Europe: inflation in line with forecasts, but pressure persists

On the European side, today brought the final release of May HICP inflation. The reading of 3.2% year on year came in exactly in line with consensus expectations, which helps stabilize short-term market positioning. However, it does not change the broader picture, where inflation remains elevated compared to last year. This keeps price pressures firmly on the radar of the European Central Bank. Particular attention continues to be drawn to persistent core inflation and the services component, both of which still show no clear disinflationary trend.

ECB and rising risks of further tightening

The lack of any positive surprise in inflation data leaves the ECB in a challenging position. After its recent rate hike, markets are once again reassessing whether the tightening cycle is truly over. If price pressures in services remain elevated and core inflation fails to meaningfully ease, the European Central Bank may be forced into another move later this year. Such a scenario limits the downside potential for the euro and acts as an important counterbalance to US dollar strength.

Market picture: tension between two central banks

EURUSD remains a market driven by two opposing narratives. On one side, investors are focused on the Fed and its impact on US dollar valuation. On the other, persistent inflation in Europe continues to support cautious expectations regarding the ECB. In this environment, markets become highly sensitive to central bank communication, while the technical structure of price action reinforces the sense of a fragile equilibrium, vulnerable to sharp shifts.

Key takeaways

  • Today’s EURUSD session is shaped by two opposing forces that broadly offset each other
  • The Fed remains the primary driver for the US dollar and could set the tone for the coming period
  • Europe continues to face persistent inflation with no clear signs of meaningful easing
  • The market remains in a wait-and-see mode with no dominant narrative
  • The key resolution will likely come only after the evening Fed decision and press conference