Canadian Dollar Rises Amid Oil Price Slump, Policy Divergence

The Canadian dollar has risen against the US dollar, reaching levels around 1.4070 as of Friday's trading session. Despite this increase, traders remain cautious due to various factors.

One key factor supporting the US dollar is the softer oil prices, which have retreated from their highest level since June 11. This pullback in oil weighs on the Canadian dollar, making it a headwind for the currency.

In addition, divergent expectations for monetary policy between the Bank of Canada and the US Federal Reserve are working against the Canadian dollar. The BoC is expected to keep interest rates unchanged, while the Fed is likely to increase borrowing costs by the end of this year.

The Trump administration's new tariff plans have also added to the risk-off mood, lending support to USD bulls. However, many market participants may prefer to see additional confirmation before concluding that USD/CAD's recovery has definitively stalled.