USD/CAD Climbs as Middle East Tensions and Fed Rate Hike Risks Boost Dollar

Today's expected range for the Canadian Dollar against the major currencies:

US Dollar        1.3730-1.3980

Euro                1.5960-1.6210

Sterling           1.8450-1.8700

WTI Oil (opening level) $91.42

The CAD/USD is opening at 1.3853 ( 0.7219 )

Overnight the USD/CAD touched1.3870 and remains well supported by a broadly firmer USD.

The latest developments surrounding the Middle East crisis temper hopes for a diplomatic solution to end a three-month-old Iran war and benefit the USD's safe-haven status.

Furthermore, bets that the US Federal Reserve will hike interest rates in 2026 turn out to be another factor supporting the USD.

Meanwhile, the move higher seems unaffected by a goodish recovery in Crude Oil prices, which tends to underpin the commodity-linked CAD, suggesting that the path of least resistance for spot prices is to the upside.

Headlines

• Iran said a return to war was unlikely, while Trump told a televised White House cabinet meeting he was "not satisfied" with negotiations, pushing back against Iranian reports about a draft memorandum of understanding.
• Trump says no nation would control the Straits of Hormuz and have carried out defensive airstrikes on Iranian military site yesterday, as it threatened American forces and commercial traffic using drones.
• Fed Governor Lisa Cook stated she is "prepared to raise rates" if inflation persists, noting that after five years of above-target inflation, she is particularly attuned to the risk that elevated inflation will become embedded in price and wage-setting behavior.
• The UK faces a "lost generation" from youth unemployment, with a government-commissioned review warning that without action, the number of young people not in education, employment or training is due to hit 1.25 million within five years, up from about 1 million currently.
• The US granted Volvo Car an exemption from a China-linked connected-vehicle ban, while European car sales rose for a third month on robust EV and hybrid demand. European firms in China are turning more upbeat even as Airbus deliveries face delays.

Key Points

• Equities: US and Europe edged higher on oil relief, while Asia reversed lower as Gulf risks returned.
• Volatility: PCE inflation, oil rebound, Middle East tensions, VIX subdued
• Digital Assets: Bitcoin below USD 73k, ETF outflows
• Commodities: Crude oil spikes and gold slumps as no end to the Middle East war remains in sight; copper shipped to the US ahead of tariff update
• Fixed Income: US Treasury yields higher on crude oil price surge. Japan’s short-dated yields drop.
• Currencies: USD firms again on jump in crude oil prices, treasury yields. EURUSD eyeing recent range lows, USDJPY eyeing 160.00 and intervention risks.
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