Geopolitical tensions and upcoming US retail data drive demand for the USD, lifting the pair from a seven-day decline.
The USD/CAD pair climbed to 1.4045, halting a seven-session losing streak during early European trading on Thursday. Heightened Middle East tensions, including US strikes on Iranian targets and retaliatory attacks, supported the USD as a safe-haven asset against the CAD.
Markets await US June Retail Sales data, which will offer clues on economic momentum and inflation trends. A softer-than-expected US Producer Price Index earlier this week reinforced expectations for the Federal Reserve to maintain current interest rates. The Bank of Canada held its benchmark rate at 2.25% for the sixth consecutive meeting, aligning with market forecasts.
Traders are assessing whether cooling inflation can sustain without triggering a sharp economic slowdown. The retail sales report will be pivotal in shaping near-term monetary policy expectations.