The Canadian Dollar weakens to its lowest level since April 2023 as Fed rate hike expectations and falling oil prices pressure the Loonie.
The USD/CAD pair climbed to 1.4250, marking a 14-month high, as the US Dollar strengthens on expectations the Federal Reserve will raise interest rates. Strong US economic data, including labor market stability and persistent inflation, fuel speculation of a near-term hike, overshadowing geopolitical concerns like the US-Iran ceasefire deal.
Canada’s currency faces additional pressure from a 20% drop in oil prices in June, its primary export. The decline in crude prices, linked to the US-Iran truce, threatens export revenues and weighs on the Loonie. Meanwhile, US Personal Consumption Expenditures (PCE) data due later Thursday is forecast to show a 4.1% annual rise, the fastest in three years, reinforcing Fed tightening bets.
The rally in USD/CAD appears overstretched, but near-term support for the US Dollar persists amid diverging monetary policy outlooks. Markets await today’s PCE figures for further direction, with a higher-than-expected print likely to extend the greenback’s gains.