• USD/CAD softesn to near 1.4205 in Wednesday’s Asian session.
• Iran’s Pezeshkian said no negotiation on ballistic missiles.
• Traders raise their bets on a US rate hike this year.

The USD/CAD pair edges lower to around 1.4205 during the Asian trading hours on Wednesday. Nonetheless, the potential downside for the pair might be limited amid rising expectations of a Federal Reserve (Fed) rate hike this year. The US May Personal Consumption Expenditures (PCE) Price Index (PCE) data will take center stage later on Thursday. 

Iran’s President Masoud Pezeshkian said on Tuesday that Tehran’s ballistic missile program will not be included in negotiations with the United States (US), per BBC.

US President Donald Trump rebuffed Iran’s claim that no visit has been scheduled for International Atomic Energy Agency (IAEA) inspectors, insisting Tehran had already agreed to the arrangement. Uncertainty surrounding US-Iran peace deal could support the US Dollar (US) against the Canadian Dollar (CAD).

Markets adjusted expectations for a more hawkish stance from the Fed, lifting the Greenback. Traders are now pricing in nearly a 86.1% chance of a Fed hike in December, up from 61% before last week’s FOMC meeting, according to the CME FedWatch tool.

The Bank of Canada (BoC) Governor Tiff Macklem said on Tuesday that global imbalances of financial flows, led by China’s export surplus and the reliance of the United States on foreign capital, and ‌may be fuelling financial stability risks.”

The Loonie has been on the backfoot for several weeks with well-documented reasoning of widening yield differentials in favor of the USD, slowing growth, trade uncertainty or the uneasy status quo and a mostly asymmetric risk response to the Iran war,” said Amo Sahota, director at Klarity FX in San Francisco.

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