Key Moments
- USD/CAD trades near 1.3874, hovering around levels last seen in early June as opposing forces from yields and Oil limit direction.
- US 10-year and 30-year Treasury yields climb toward 4.75% and above 5.30%, respectively, helping the US Dollar recover from two-month lows.
- Canada’s CPI rises to 3.0% YoY in July from 2.8% in June, while TD Securities continues to expect the BoC to stay on hold through 2026.
USD/CAD Steadies as Yields and Oil Pull in Opposite Directions
USD/CAD is trading largely flat on Tuesday, caught between a firmer US Dollar and ongoing support for the Canadian Dollar from elevated Oil prices. At the time of writing, the pair is quoted around 1.3874, close to levels last seen in early June.
Rising long-term US Treasury yields are providing a lift to the Greenback, while strength in crude Oil continues to underpin the commodity-linked Canadian Dollar, leaving the pair lacking a clear directional bias.
US Dollar Rebounds Alongside Climbing Treasury Yields
The benchmark 10-year US Treasury yield has moved toward 4.75%, and the 30-year yield has advanced above 5.30%, marking its highest level since 2007. These higher yields are helping the US Dollar stage a modest rebound from the two-month lows reached on Monday.
The US Dollar Index (DXY), which measures the currency against a basket of six major peers, is trading around 99.67, up 0.10% on the session. Despite this uptick, moves in Oil are expected to remain the key near-term catalyst for USD/CAD.
| Indicator | Latest Level | Context |
|---|---|---|
| USD/CAD | 1.3874 | Near early June highs |
| US 10-year Treasury yield | 4.75% (toward) | Rising long-term rates |
| US 30-year Treasury yield | Above 5.30% | Highest since 2007 |
| US Dollar Index (DXY) | 99.67 | +0.10% on the day |
| WTI crude Oil | $84.25 per barrel | Up 3.15% on Monday |
| Canada CPI (YoY, July) | 3.0% | Up from 2.8% in June |
Oil Strength Anchors the Canadian Dollar
Oil remains a central driver for CAD performance. Analysts at Commerzbank highlight that “the performance of the Canadian dollar has understandably been closely linked to the oil price in recent months.” They add that the relationship is unlikely to fade quickly and that “this trend is likely to continue unless the Strait of Hormuz is kept open on a sustained basis.”
West Texas Intermediate (WTI) crude is trading around $84.25 per barrel after a 3.15% gain on Monday, holding close to its highest level in more than two weeks. The resilience in Oil prices is reinforcing support for the Canadian Dollar and helping counterbalance US Dollar strength.
Canada Inflation Firming, But BoC Outlook Unchanged
Higher Oil prices are keeping inflation concerns elevated. Data published on Monday showed that Canada’s Consumer Price Index accelerated to 3.0% year-over-year in July, up from 2.8% in June. Nonetheless, the release did not significantly alter market expectations for Bank of Canada policy.
Economists at TD Securities noted that the latest CPI report indicated that “core inflation measures looked a little less benign than prior months.” They concluded that “the Bank of Canada can stay patient as it waits for more clarity around the growth outlook beyond Q2,” and reiterated that they “continue to look for the Bank to stay on hold through 2026.”
Fed Rate Path Uncertain Amid Mixed US Signals
On the US side, softer recent economic data have led traders to dial back the likelihood of a Federal Reserve rate hike at the September meeting. However, risks stemming from energy-related inflation are keeping alive the prospect of a further rate increase later this year.
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