Persistent US-Iran tensions and Fed rate hike bets support the USD, offsetting higher oil prices and limiting CAD upside.
The USD/CAD pair remains near mid-1.3800s in Asian trading, extending its recovery from a three-month low. The US Dollar benefits from safe-haven demand amid escalating US-Iran tensions and expectations of a Fed rate hike in 2026 due to inflation risks from volatile energy prices.
Crude oil prices have risen on geopolitical risks, including Iran’s threat to halt oil exports via the Strait of Hormuz. This supports the commodity-linked Canadian Dollar, capping further gains for USD/CAD. However, broader concerns about a deepening US-China trade war continue to weigh on the CAD.
Treasury Secretary Scott Bessent’s announcement of a US campaign to isolate Iran economically has heightened market uncertainty, reinforcing the USD’s strength. The pair’s bullish momentum remains cautious as opposing forces balance near-term direction.