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Canadian dollar holds near four-week high versus USD as oil firms
USD/CAD stays just below the mid-1.4000s as traders scale back Fed hike expectations after weaker US inflation data, while US-Iran tensions keep crude near a one-month high.
The Canadian dollar is holding near a four-week high against the US dollar, with USD/CAD consolidating in a tight range during the Asian session and trading just below the mid-1.4000s after earlier losses.
FXStreet reports that the near-term driver is a softer US policy outlook, with USD close to its lowest level since June 18 as Fed rate hike expectations fade following cooling inflation signals. The US Producer Price Index fell 0.3% last month, after a revised 0.6% increase the prior month, coming on top of a weaker US Consumer Price Index reading released on Tuesday.
At the same time, oil prices are firm near a one-month high, which supports the commodity-linked Loonie. FXStreet links the oil strength to escalating US-Iran tensions, including closure of the Strait of Hormuz and additional strikes and retaliatory attacks, alongside reports that a US aircraft fired on an unladen oil tanker attempting to break Iran’s naval blockade.
FXStreet adds that concerns over energy-driven inflation remain, helped by the widening military confrontation and President Donald Trump warning of potential targeting of critical Iranian infrastructure if conditions deteriorate. That risk keeps interest rate hike expectations on the table, preventing traders from leaning too aggressively into fresh bearish bets on USD/CAD.