The USD/CAD currency pair extended its rally for the fourth consecutive trading day on Thursday, reaching near 1.3830 during the Asian trading session, marking its highest level in two months [1]. This movement was driven by heightened uncertainty surrounding ongoing conflicts in the Middle East, involving the United States, Israel, and Iran, which has bolstered safe-haven demand for the US Dollar [1]. As of the time of reporting, the US Dollar Index (DXY) maintained Wednesday’s gains, trading around 99.65 [1].
Iran has pushed back hopes for de-escalation in the region, stating it is not directly involved in negotiations with the US regarding a month-long ceasefire proposal and a 15-point settlement plan. Iran described the Pakistan-delivered proposal as excessive and demanded sovereignty over the Strait of Hormuz. A senior Iranian official indicated that talks could be held in Pakistan or Turkey if they proceed, according to Reuters [1].
On the domestic front, traders remain confident that the Federal Reserve will not cut interest rates this year, as surging energy prices have de-anchored inflation expectations [1]. This sentiment has contributed to the US Dollar’s strength. Meanwhile, the Canadian Dollar has underperformed most major currency peers, except for antipodeans, as investors remain cautious amid the Middle East conflict. However, the broader outlook for the Loonie remains firm due to higher oil prices, which are favorable for Canada as a net oil exporter [1].
CONCLUSION
The USD/CAD pair’s rally reflects increased safe-haven demand for the US Dollar amid geopolitical tensions and expectations of steady US interest rates. While the Canadian Dollar has lagged most peers, higher oil prices provide some support for its outlook. Market sentiment remains cautious, with traders closely monitoring developments in the Middle East and energy markets.