Stronger US rate hike expectations and geopolitical risks offset Canada’s solid retail sales and higher oil prices.
The USD/CAD pair climbed to 1.4088 on Thursday, recovering from an intraday low of 1.4056, as the US Dollar strengthened amid escalating Middle East tensions and rising Federal Reserve rate hike bets. Canadian Retail Sales rose 1.0% month-over-month in May, matching forecasts, while sales excluding autos missed expectations at 1.2%.
Oil prices surged near $89.90 per barrel, the highest since June 11, due to supply disruptions in key shipping routes. Despite Canada’s status as a major crude exporter, the Loonie failed to gain traction as US Dollar demand dominated. Markets now price a 78% chance of a Fed rate hike in September, up from 52% a week ago.
The US Dollar Index (DXY) advanced as traders weighed the Fed’s potential policy path, with a 32% probability of an immediate hike at next week’s meeting.