Geopolitical risks and higher US inflation data drive safe-haven flows into the USD, pressuring the Canadian Dollar.
The USD/CAD pair climbed 0.23% to near 1.3975 on Thursday, as the US Dollar strengthened amid heightened Middle East tensions. Investors remain cautious following recent exchanges between the US and Iran, raising concerns over a potential escalation despite ongoing diplomatic talks.
US inflation accelerated to 4.2% year-over-year in May, exceeding the Federal Reserve’s 2% target and reinforcing expectations of tighter monetary policy. The US Dollar Index (DXY) rebounded toward 100.05, further weighing on growth-sensitive currencies like the CAD.
Market sentiment remains fragile, with risk appetite subdued despite assurances from US officials that recent military actions were not the start of a broader conflict.