Rising crude prices bolster the CAD amid Middle East tensions, offsetting Fed rate hike expectations ahead of key retail sales data.
The USD/CAD pair retreated to 1.4060 in early European trading Thursday, pressured by a surge in crude oil prices. The commodity-linked Canadian Dollar gained support as geopolitical risks in the Middle East intensified, with Iran-backed attacks on Saudi oil tankers raising supply disruption fears.
Canada’s status as a major oil exporter typically strengthens the Loonie when crude prices climb. Traders also awaited Canada’s Retail Sales report later Thursday, while Fed rate hike probabilities for July rebounded to 26% after dipping post-CPI. Markets now eye Friday’s US S&P Global Flash PMI for further direction.
A stronger-than-expected PMI could reinforce the USD against the CAD, though elevated oil prices may limit downside risks for the Canadian currency.