CAD Edges Higher vs Soft USD Amid Mixed Cues and Divergent Policy Expectations

The Canadian Dollar (CAD) has seen modest gains against the US Dollar (USD), but bulls seem hesitant to make a strong move amid mixed cues. The USD/CAD pair is trading around the 1.4070 zone, down 0.10% for the day due to a softer USD.

Crude oil prices have retreated from their highest level since June 11, with some profit-taking ahead of the week. This, combined with divergent policy expectations between the Bank of Canada (BoC) and the US Federal Reserve (Fed), as well as new tariffs imposed by President Donald Trump, is keeping a lid on commodity-linked Loonie.

The BoC's decision to keep interest rates unchanged through 2026 has reaffirmed bets that inflation will remain under control. In contrast, traders are pricing in a greater chance of a US rate hike this year due to energy-driven inflation concerns.