USD/CAD extends its gains for the second consecutive day, trading around 1.4230 during the Asian session on Tuesday. The commodity-linked Canadian Dollar (CAD) continues to struggle against the US Dollar (USD) under the weight of lower energy prices.
West Texas Intermediate crude pulled back near $70.10 per barrel at the time of writing, erasing its previous gains. This decline directly reflects the actions of energy traders who are cautiously weighing the volatile mix of Middle East geopolitical standoffs, potential diplomatic off-ramps, and the evolving security situation in crucial global shipping lanes.
The USD/CAD pair shifted upward as the US Dollar rises on rising hawkish sentiment surrounding the Federal Reserve’s (Fed) policy trajectory. According to the CME FedWatch tool, traders are now pricing in a nearly 60% probability of a Fed interest rate hike by September. This aggressive shift has intensified focus on this week’s key US labor market reports, particularly Thursday’s Nonfarm Payrolls (NFP) data, for definitive clues on the central bank’s next moves. Forecasters currently expect June job growth to land at 114,000, with the Unemployment Rate holding flat at 4.3%.
Beyond interest rate expectations, the Greenback is drawing safe-haven support from persistent geopolitical friction in the Middle East, though diplomatic signals remain highly conflicted. US President Donald Trump announced that the two nations were set to hold fresh peace talks on Tuesday in Doha, Qatar, following a weekend of regional hostilities. However, Tehran sharply contradicted this claim, stating that no negotiation meetings are scheduled with Washington at any level and emphasizing that Iran remains focused on implementing its existing memorandum of understanding rather than entering final agreement talks.
Further complicating the geopolitical landscape, Tehran reiterated its intent to oversee traffic through the strategic Strait of Hormuz, even if Oman opts out of joint oversight. Under the current interim agreement, Iran will waive transit fees for 60 days but has floated the possibility of introducing shipping charges thereafter, a proposal firmly opposed by the US, Europe, and Gulf Arab states. While maritime shipping through the vital waterway slowed over the weekend after clashes damaged two vessels, tanker operators and crews have so far shown a continued willingness to transit the route.