The Canadian Dollar recovers from two-month lows as USD softens on Middle East de-escalation and shifting Fed rate expectations.
USD/CAD pares gains, trading near 1.3940 after hitting a two-month peak of 1.39613. The pullback follows a decline in safe-haven USD demand as Iran and Israel agree to halt attacks, easing geopolitical tensions.
The pair had risen for four consecutive sessions amid strong US jobs data, which stoked inflation concerns and lifted Fed rate hike probabilities. The CME FedWatch tool now shows a 43% chance of a December quarter-point hike, up from 14% a month ago.
Despite the ceasefire, caution persists as Israeli officials warn of ongoing threats, including potential strikes in Lebanon. Markets remain sensitive to Middle East developments and US monetary policy signals.