Canadian Dollar Slips as Fed Outlook Lifts Greenback

Key Moments

USD/CAD traded near 1.4230 after touching a more-than-one-year peak at 1.4239.
Money markets priced in nearly an 86% probability of a Federal Reserve rate hike by December, up from about 61% before the latest FOMC meeting.
Canadian Dollar underperformed broadly, except against the New Zealand Dollar, where it showed the strongest relative gain.

USD/CAD Extends Gains on Fed Bets and Softer Oil

USD/CAD was last trading higher around 1.4230 on Wednesday, after earlier advancing to a more-than-one-year high at 1.4239. The Canadian Dollar (CAD) remained under pressure, weighed down by weaker Oil prices, while the overall macro backdrop continued to favor the US Dollar (USD) as markets increased expectations for further Federal Reserve (Fed) tightening this year.

Iran Tensions Support Safe-Haven Flows

Geopolitical risks linked to Iran continued to underpin demand for the Greenback. Iranian President Masoud Pezeshkian stated that Tehran’s ballistic missile program will not be part of negotiations with the United States (US), while US President Donald Trump disputed Iran’s claims regarding inspections by the International Atomic Energy Agency. Ongoing uncertainty around a possible accord between Washington and Tehran contributed to safe-haven support for the USD.

Fed Expectations and Upcoming PCE Data in Focus

The US Dollar Index (DXY), which tracks the Greenback against a basket of six major currencies, traded around 101.60, hovering near its highest level in more than a year. Money market pricing indicated nearly an 86% likelihood of another Fed rate increase by December, compared with around 61% before last week’s Federal Open Market Committee (FOMC) decision. The Fed’s updated projections also signaled that a majority of policymakers still saw room for additional rate hikes this year.

Market participants were now looking ahead to Thursday’s release of the US Personal Consumption Expenditures (PCE) Price Index for May. As the Fed’s preferred measure of inflation, the PCE report was expected to provide fresh insight into the near-term path of monetary policy.

Bank of Canada Commentary and CAD Headwinds

In Canada, Bank of Canada (BoC) Governor Tiff Macklem said on Tuesday that global financial flow imbalances, partly reflecting China’s export surplus and the United States’ dependence on foreign capital, could heighten financial stability risks. At the same time, Amo Sahota, director at Klarity FX, noted that the Canadian Dollar had remained under strain in recent weeks due to wider yield differentials favoring the US Dollar, softer economic momentum, and persistent trade uncertainty.

Canadian Dollar Performance Against Major Currencies

The table below summarizes the intraday percentage change of the Canadian Dollar versus major counterparts. On the day, the Canadian Dollar showed its strongest relative performance against the New Zealand Dollar.

	USD	EUR	GBP	JPY	CAD	AUD	NZD	CHF
USD		0.37%	0.30%	0.06%	0.12%	0.30%	0.52%	0.37%
EUR	-0.37%		-0.06%	-0.31%	-0.26%	-0.07%	0.11%	0.00%
GBP	-0.30%	0.06%		-0.23%	-0.21%	-0.01%	0.17%	0.06%
JPY	-0.06%	0.31%	0.23%		0.06%	0.24%	0.42%	0.31%
CAD	-0.12%	0.26%	0.21%	-0.06%		0.18%	0.35%	0.27%
AUD	-0.30%	0.07%	0.00%	-0.24%	-0.18%		0.18%	0.05%
NZD	-0.52%	-0.11%	-0.17%	-0.42%	-0.35%	-0.18%		-0.11%
CHF	-0.37%	-0.01%	-0.06%	-0.31%	-0.27%	-0.05%	0.11%

The heat map shows percentage changes of major currencies against each other. The base currency is selected from the left column, and the quote currency from the top row. For example, selecting the Canadian Dollar from the left column and moving horizontally to the US Dollar cell displays the percentage change for CAD (base)/USD (quote).