USD/CAD may experience depreciation as the commodity-linked Canadian Dollar could find support from rising oil prices. The US Dollar exhibited resilience amid increased risk aversion stemming from renewed geopolitical tensions in the Middle East. The US executed a series of third-wave retaliatory strikes on Iranian coastal targets on Wednesday, in response to an Iranian ballistic missile attack originating from Isfahan.
USD/CAD inches higher after posting minor gains in the previous day, trading around 1.3950 during the Asian hours on Wednesday. The pair may depreciate as the commodity-linked Canadian Dollar could receive support from higher oil prices, given Canada’s status as the largest crude exporter to the United States. Crude oil prices experienced an uptick in the earlier hours, driven by escalating conflicts in the Middle East that have rekindled significant concerns regarding supply. Following a brief decline in prices on Tuesday, when hostilities between Israel and Iran were temporarily suspended, the conflict rapidly intensified once more.
Reports indicate that the US executed a third wave of retaliatory strikes on Iranian coastal targets on Wednesday, following Iran’s launch of at least three ballistic missiles from Isfahan. This followed an initial round of US strikes on Tuesday, which Washington characterised as a proportional response to Iran’s downing of a US helicopter gunship near the critical Strait of Hormuz. The USD/CAD pair holds ground as the US Dollar remains firm amid increased risk aversion following renewed tensions in the Middle East. On Tuesday, it was reported that the United States initiated military strikes against Iran following a statement from President Donald Trump, who alleged that Tehran had downed a US Apache helicopter in the Strait of Hormuz.
Early Tuesday, Trump underscored that Iran and the US are nearing an agreement, despite the limited indications of advancement since the fragile ceasefire was implemented in early April. Uncertainty regarding the Middle East peace deal persists, exacerbating worries about inflation and the anticipation of sustained high interest rates. Stronger-than-anticipated employment figures from the US for May have heightened projections for a potential rate increase by the Federal Reserve this year.