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- USD/CAD falls as the US Dollar pauses ahead of Middle East updates and crucial Fed policy data.
- A hot US inflation report solidified expectations for a “higher-for-longer” Federal Reserve interest rate environment.
- The Canadian Dollar may weaken as falling oil prices follow reports of the US completing military strikes in Iran.
USD/CAD loses ground for the third successive day, trading around 1.3940 during the Asian hours on Thursday. The pair depreciates as the US Dollar (USD) holds losses as investors assess ongoing Middle East tensions with anticipation of upcoming US economic data, which could signal the Federal Reserve’s next policy moves.
The Greenback may regain its ground amid rising safe-haven demand due to the ongoing Middle East conflict. Israeli military says that the Home Front Command, the branch of the Israel Defense Forces (IDF) responsible for civil defense, issued an early warning after launches from Lebanon toward northern Israel.
The US Dollar (USD) gained ground after a hot inflation report released on Wednesday, which effectively solidified expectations for a “higher-for-longer” interest rate environment from the Federal Reserve. Driven primarily by war-induced energy price spikes, US inflation accelerated in May to its fastest pace in over three years. %. Traders await the upcoming release of the May Producer Price Index (PPI) and Initial Jobless Claims later today.
The US Consumer Price Index (CPI) rose 4.2% year-over-year and 0.5% monthly, both perfectly matching market forecasts. Meanwhile, core CPI, which strips out volatile food and energy costs, climbed 0.2% on the month and 2.9% annually. Following the data release, financial markets aggressively pivoted, abandoning any remaining expectations for Fed rate cuts this year.
The downside of the USD/CAD pair could be restrained as the commodity-linked Canadian Dollar (CAD) may face challenges amid lower oil prices, given Canada’s status as the largest crude exporter to the United States (US).
West Texas Intermediate (WTI) oil holds losses near $89.50 per barrel at the time of writing. Crude oil prices eased after the US military announced it had completed its latest strikes on Iran, raising hopes that peace negotiations could resume and tempering oil supply concerns.
Earlier, the US launched fresh attacks on Iran after President Trump accused Tehran of delaying talks on an interim peace agreement, while Iran reportedly responded by targeting US vessels in the Strait of Hormuz.
