Canadian Dollar Slips as Oil Falls, USD Gains

Key Moments

USD/CAD Advances as Energy Weakness Pressures the Loonie

USD/CAD extended its upward move for a second consecutive session, with the pair trading near 1.4230 during the Asian session on Tuesday. The Canadian Dollar (CAD), closely tied to commodity performance, remained under pressure against the US Dollar (USD) as lower energy prices weighed on the currency.

West Texas Intermediate (WTI) crude oil fell back toward $70.10 per barrel at the time of writing, giving up earlier gains. The pullback aligned with cautious positioning by energy market participants as they assessed an uncertain mix of geopolitical standoffs in the Middle East, possible diplomatic openings, and evolving security risks across key global shipping routes.

Hawkish Fed Expectations and Safe-Haven Demand Bolster the US Dollar

The USD/CAD pair moved higher as the US Dollar strengthened, supported by growing expectations that the Federal Reserve may lean more hawkish on interest rates. Data from the CME FedWatch tool showed that traders were pricing in nearly a 60% probability of a Fed rate hike by September, reflecting a more aggressive policy outlook.

This shift in expectations sharpened market attention on upcoming US labor indicators, particularly this week’s Nonfarm Payrolls (NFP) report scheduled for Thursday. Current forecasts point to June job creation of 114,000 and an unchanged Unemployment Rate of 4.3%, figures that investors are watching for guidance on the Fed’s next policy steps.

Beyond rate speculation, the Greenback continued to benefit from safe-haven flows amid ongoing geopolitical strains in the Middle East. Diplomatic messaging remained inconsistent, adding to investor uncertainty.

Conflicting US-Iran Narratives and Strait of Hormuz Risks

US President Donald Trump stated that the United States and Iran were prepared to commence new peace talks on Tuesday in Doha, Qatar, following a weekend marked by regional hostilities. Tehran, however, directly rejected this portrayal, asserting that no talks with Washington were planned “at any level” and stressing that its focus remained on carrying out an existing memorandum of understanding rather than pursuing final agreement negotiations.

Tehran further underlined its intention to maintain oversight of movements through the strategically critical Strait of Hormuz, even in the event that Oman declines to participate in joint supervision. Under the current interim arrangement, Iran is waiving transit fees for a 60-day period, but it has raised the possibility of imposing shipping charges afterward. That idea has faced resistance from the US, European countries, and Gulf Arab states.

Over the weekend, traffic through the Strait of Hormuz slowed after two vessels were damaged in clashes. Despite this, tanker operators and crews have continued to demonstrate willingness to use the route, preserving flows through the waterway so far.