Softer US inflation data reduces Fed rate hike expectations, while rising crude prices bolster the Canadian dollar near 1.4045.
The USD/CAD pair fell to a four-week low of 1.4045-1.4040 in Asian trading, extending its decline for a second session. The drop follows weaker-than-expected US inflation data, which trimmed bets on Federal Reserve rate hikes.
June’s US Consumer Price Index dropped 0.4%, exceeding forecasts of a 0.1% decline and marking the steepest monthly fall since April 2020. Meanwhile, crude oil prices climbed to a near one-month high amid escalating US-Iran tensions, supporting the commodity-linked Canadian dollar.
Geopolitical risks, including US airstrikes on Iran and threats of further action, kept oil markets volatile. The fundamental backdrop favors further downside for USD/CAD, analysts said.