USD/CAD rebounded on Thursday as the US Dollar regained traction, with the pair trading around 1.4088 after touching an intraday low of 1.4056. Canada’s May Retail Sales rose 1.0% month on month, matching forecasts and speeding up from 0.4% in April, while Retail Sales excluding autos increased 1.2% versus a 1.4% estimate after being flat previously. The US Dollar Index was near 101.30, recovering from 100.94, as markets leaned towards tighter Federal Reserve policy: CME FedWatch pricing implied a 78% probability of a September rate hike, up from 52% a week earlier, and about a 32% chance of a move at next week’s meeting, even as rates are otherwise expected to be left unchanged.
Geopolitical Tensions And Oil Market Impact
Geopolitical risk remained in focus after the United States and Iran exchanged attacks for a 12th straight day, alongside reported supply disruptions extending from the Strait of Hormuz to the Bab el-Mandeb Strait. Oil prices pushed higher, with WTI around $92.00 a barrel, the highest since June 11, feeding broader inflation concerns. While firmer crude prices can support the Canadian Dollar given Canada’s exporter status, expectations that the Bank of Canada will keep rates unchanged as core inflation sits near its 2% target contrasted with shifting Fed pricing.
