The USD/CAD currency pair declined for a second consecutive day on Monday, trading around 1.3610 and marking a 0.44% drop on the day, which brought it to its lowest level in six weeks [1]. This movement was primarily driven by a broad weakening of the US Dollar, attributed to improved market sentiment following reports of a potential resumption of dialogue between the United States and Iran. According to Axios, Tehran has submitted a new proposal aimed at ending the conflict and reopening the Strait of Hormuz, a critical route for global oil supply. While negotiations remain uncertain, these developments have fostered moderate optimism and reduced demand for the US Dollar as a safe-haven asset [1].
Simultaneously, the Canadian Dollar has been supported by elevated oil prices, with West Texas Intermediate (WTI) crude trading around $94.65 per barrel, up 1.32% for the day. This increase is underpinned by ongoing concerns over global supply disruptions in the Strait of Hormuz. As Canada is the largest oil exporter to the United States, the Canadian Dollar has benefited from this dynamic [1]. However, the article notes that hopes for a potential agreement between the US and Iran could eventually weigh on crude prices by easing supply risks, which may limit further support for the Canadian Dollar [1].
Looking ahead, investors are focused on upcoming monetary policy decisions. The Bank of Canada is expected to keep rates unchanged, maintaining a cautious stance amid geopolitical uncertainty and persistent inflation pressures. A few hours later, the Federal Reserve is also likely to hold rates steady, with markets broadly anticipating a prolonged period of policy stability. The Fed meeting carries additional significance as it could be the last chaired by Jerome Powell, adding to uncertainty about the central bank's future stance and potentially increasing volatility in the US Dollar in the coming days [1].
On the day, the US Dollar was the strongest against the Japanese Yen but weakened against most other major currencies, including a 0.47% drop versus the Canadian Dollar [1].
CONCLUSION
USD/CAD's decline to six-week lows reflects a combination of US Dollar weakness amid geopolitical optimism and Canadian Dollar strength from higher oil prices. Market attention now shifts to upcoming central bank decisions, which could introduce further volatility. The evolving situation in the Strait of Hormuz and central bank guidance remain key factors for the currency pair.