The Canadian Dollar remains subdued despite WTI crude nearing $92.60 amid Middle East tensions and Fed rate hike expectations.
The USD/CAD pair climbed to 1.3850 in Asian trading, reversing minor losses from the previous session. Despite a third consecutive rise in West Texas Intermediate crude to near $92.60 per barrel, the commodity-linked Canadian Dollar failed to gain traction as risk aversion dominated markets.
Oil prices surged following escalating Middle East hostilities, including Iran’s missile and drone attacks on Kuwait and Bahrain. The threat of a prolonged Strait of Hormuz closure heightened fears of energy supply disruptions, reinforcing expectations of sustained inflationary pressures. Meanwhile, US economic resilience, evidenced by a jump in the May ISM Manufacturing PMI to 54.0 and April JOLTS job openings hitting 7.61 million, bolstered the case for prolonged Federal Reserve rate hikes.
The US Dollar strengthened on the prospect of higher-for-longer interest rates, overshadowing the CAD’s typical sensitivity to oil price movements. Market caution persisted despite geopolitical risks, keeping the currency pair elevated.