USD/CAD maintains its losses following the signing of a preliminary agreement between the US and Iran aimed at concluding hostilities, which has resulted in a reduction of safe-haven demand. The US Dollar may regain strength as half of the FOMC members anticipate at least one rate hike this year. An increase in oil prices could offer some support to the commodity-linked Canadian Dollar. USD/CAD experiences a slight decline following a five-day upward trend, currently trading near 1.4100 during the Asian session on Thursday. The pair holds losses as the US Dollar slips on easing safe-haven demand following the BBC report late Wednesday, indicating that the White House confirmed that US President Donald Trump and Iranian President Masoud Pezeshkian signed a preliminary memorandum of understanding designed to end the US-Israel war on Iran.
This decisive executive action follows the electronic signing of the initial framework by U.S. Vice President JD Vance and Iranian Parliamentary Speaker Mohammad Bagher Ghalibaf earlier in the week. However, the USD/CAD pair may regain its ground as the US Dollar could rebound on increasing expectations of rate hikes by the Federal Reserve later this year. The Fed’s June Summary of Economic Projections indicated that half of the FOMC members anticipate at least one rate hike within the current year. Despite economic disruptions associated with the conflict in Iran, robust labour market data and ongoing underlying inflation indicators persistently exert tightening pressures. The Federal Open Market Committee reached a unanimous decision to keep its benchmark federal funds rate within the range of 3.5% to 3.75%.
In his inaugural meeting following his appointment as the head of the US central bank, Kevin Warsh, the newly appointed Federal Reserve Chairman, committed to a vigorous approach to re-establishing price stability. Additionally, the USD/CAD pair holds losses as the commodity-linked Canadian Dollar may receive some support from higher oil prices. West Texas Intermediate oil price holds gains around $75.10 per barrel at the time of writing. However, crude oil prices may encounter obstacles stemming from a reduction in tensions in the Middle East and ongoing supply concerns, coupled with the increasing likelihood of Federal Reserve rate hikes by the conclusion of 2026.