Key Moments
- USD/CAD traded near its highest level since late March during Monday’s Asian session, extending gains beyond the mid-1.3900s.
- WTI Crude Oil jumped about 4.50% after an Iranian missile strike on Israel’s Ramat David air base, supporting the Canadian Dollar.
- Markets are pricing more than a 70% probability of a US Federal Reserve rate hike by year-end following stronger-than-expected US payrolls.
Oil Rally and Canadian Labor Data Counter USD/CAD Upside
The USD/CAD pair attracted additional buying interest during the Asian session on Monday, briefly reaching a new high not seen since late March and pushing above the mid-1.3900s. Despite this advance, gains appeared constrained as a strong rise in Crude Oil prices and robust Canadian employment data lent support to the Canadian Dollar, while the US Dollar’s momentum eased.
West Texas Intermediate (WTI) Crude Oil climbed around 4.50% after Iran launched missiles at Israel’s Ramat David air base on Sunday night. The attack raised concerns about the durability of a fragile ceasefire and dampened expectations for an agreement to end a three-month-old conflict. The move in Oil, a key Canadian export, underpinned the commodity-linked Loonie and acted as a counterweight to further upside in USD/CAD.
Additional support for the Canadian Dollar came from Friday’s labor market release. Statistics Canada reported that the economy added 87,800 jobs in May, while the unemployment rate declined to 6.6%. The stronger employment backdrop reinforced demand for CAD and encouraged some caution among traders positioned for further USD/CAD gains.
US Dollar Takes a Pause After Payrolls-Driven Surge
The US Dollar stalled after a sharp rally on Friday that followed an upbeat US Nonfarm Payrolls (NFP) report, helping to cap the USD/CAD pair. The US economy created 172,000 jobs in May, well above the 85,000 consensus forecast and only slightly below the prior month’s upwardly revised figure of 179,000. The Unemployment Rate remained unchanged at 4.3%, offsetting the impact of a softer outcome in Average Hourly Earnings.
In response to the stronger US labor data, market participants moved quickly to adjust interest-rate expectations. Traders are now assigning more than a 70% probability that the US Federal Reserve will raise interest rates before the end of this year. These shifting expectations, combined with renewed geopolitical tensions, continued to provide a constructive backdrop for the US Dollar.
Geopolitical Risks Support Safe-Haven USD
Persistent geopolitical uncertainty remained a key theme. In the latest developments, the Israeli air force struck military targets in western and central Iran in retaliation for Iran’s ballistic missile attack on Israel’s Ramat David air base on Sunday night. The heightened tensions helped sustain safe-haven demand for the US currency.
Taken together, these factors suggest that the broader bias for the US Dollar is still tilted to the upside, reinforcing the case for an extension of the USD/CAD uptrend that has been in place for roughly the past month. However, the concurrent strength in Oil and the positive Canadian employment data tempered the immediate upside for the pair.
Near-Term Outlook: Data Void Leaves Focus on Oil and Headlines
Looking ahead, there were no major US or Canadian economic releases scheduled for Monday that could significantly alter the near-term trajectory of USD/CAD. In the absence of fresh data, traders were likely to focus on movements in Oil prices and further geopolitical developments as the primary drivers of short-term direction in the pair.
| Market Driver | Latest Detail | Likely Impact on CAD / USD |
|---|---|---|
| USD/CAD price action | Fresh high since late March, above mid-1.3900s | Favors USD but with resistance from CAD-supportive factors |
| WTI Crude Oil | Up around 4.50% after Iran’s missile attack on Israel’s Ramat David air base | Supports CAD through stronger Oil-linked revenues |
| Canada jobs data (May) | 87,800 jobs added; unemployment rate at 6.6% | Positive for CAD, limiting USD/CAD upside |
| US NFP (May) | 172,000 jobs vs 85,000 expected; prior revised to 179,000 | Supports USD via stronger labor market narrative |
| US unemployment rate | Held at 4.3% | Reinforces perception of labor market resilience |
| Fed rate expectations | Over 70% chance of a rate hike by year-end | USD-positive through higher expected yields |
| Geopolitical developments | Israeli air force strikes targets in western and central Iran | Supports safe-haven demand for USD |
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