Key Moments
- USD/CAD trades just below the mid-1.4000s during the Asian session, stabilizing near a four-week low for the pair.
- US PPI fell 0.3% after a revised 0.6% increase, adding to a soft CPI print and further dampening Fed rate hike expectations.
- Escalating US-Iran tensions and the closure of the Strait of Hormuz help keep crude prices elevated, supporting the Canadian Dollar.
USD/CAD Steadies After Hitting Four-Week Low
The USD/CAD pair is fluctuating within a tight range in Asian trading on Thursday, consolidating after dropping to a four-week low in the prior session. Spot levels are currently positioned just under the mid-1.4000s, showing little net change on the day, even as underlying drivers continue to favor a weaker US Dollar against the Canadian Dollar.
Fed Expectations Erode as US Data Softens
The US Dollar remains pinned near its weakest point since June 18 as expectations for additional US Federal Reserve rate hikes continue to fade. Fresh data released on Wednesday showed the US Producer Price Index (PPI) declined 0.3% in the latest month, reversing a revised 0.6% gain previously. Combined with a subdued US Consumer Price Index (CPI) reading on Tuesday, the figures have prompted markets to scale back bets on more tightening by the Fed, keeping USD buyers on the back foot.
Despite the softer inflation tone from recent data, concerns about renewed price pressures driven by energy markets have not fully dissipated, given ongoing geopolitical strains and supply risks in the Middle East.
Oil-Supported Loonie Counters Cautious BoC Outlook
Crude oil prices are holding close to a one-month high, supported by escalating tensions between the US and Iran and the closure of the Strait of Hormuz. This resilience in energy prices is helping to underpin the commodity-linked Canadian Dollar, offsetting the impact of the Bank of Canada’s cautious stance. The combination of softer US rate expectations and firm oil prices reinforces a negative bias for USD/CAD, even as downside in the pair is constrained.
US-Iran Confrontation Fuels Market Uncertainty
The confrontation between the US and Iran has intensified sharply since the start of this week, with both sides engaging in new rounds of military action. US forces have carried out additional airstrikes on Iranian missile and drone facilities, while Iran has responded with drone and missile attacks on US-linked military targets across the region. In another development, a US aircraft fired on an unladen oil tanker attempting to breach the naval blockade of Iranian ports.
These events signal a deepening military standoff. US President Donald Trump has further raised the stakes, warning that key Iranian infrastructure, including power plants and bridges, could be targeted if conditions worsen. This backdrop is helping to keep crude prices elevated and leaves the door open to potential interest rate hikes, which in turn restrains traders from adding aggressively to bearish positions in USD/CAD and contributes to limiting further downside in the pair.
Canadian Dollar Performance Against Major Currencies
The Canadian Dollar has posted varied moves against major counterparts this week, with notable strength versus the Japanese Yen. The table below summarizes percentage changes among the main currencies over the period, using the base currency from the left column and the quote currency from the top row.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.61% | -1.07% | 0.18% | -0.80% | -0.72% | -1.39% | -0.34% | |
| EUR | 0.61% | -0.49% | 0.82% | -0.21% | -0.16% | -0.80% | 0.28% | |
| GBP | 1.07% | 0.49% | 1.25% | 0.25% | 0.32% | -0.32% | 0.80% | |
| JPY | -0.18% | -0.82% | -1.25% | -1.09% | -0.91% | -1.62% | -0.58% | |
| CAD | 0.80% | 0.21% | -0.25% | 1.09% | 0.19% | -0.54% | 0.53% | |
| AUD | 0.72% | 0.16% | -0.32% | 0.91% | -0.19% | -0.64% | 0.34% | |
| NZD | 1.39% | 0.80% | 0.32% | 1.62% | 0.54% | 0.64% | 1.12% | |
| CHF | 0.34% | -0.28% | -0.80% | 0.58% | -0.53% | -0.34% | -1.12% |
As indicated, the Canadian Dollar has been strongest against the Japanese Yen this week. The heat map structure shows the percentage change of each base currency (left column) versus each quote currency (top row). For instance, selecting the Canadian Dollar on the left and moving across to the US Dollar cell provides the CAD (base)/USD (quote) percentage change.
TradingPedia.com is a financial media specialized in providing daily news and education covering Forex, equities and commodities. Our academies for traders cover 
