Canadian Dollar Surges Amid Oil Price Gains and Fading Rate Hike Bets

The Canadian Dollar extended its gains yesterday as oil prices climbed and bets on an immediate US Federal Reserve rate hike faded. The USD/CAD pair dropped to a fresh low since June 10, with bears targeting further losses below the 1.3900 mark.

Traders trimmed their bets for an interest rate hike by the Fed after Thursday's soft Producer Price Index report and signs of cooling inflation from the US Consumer Price Index. The weak US Nonfarm Payrolls report last week also bolstered expectations that the Fed will keep rates steady, weighing on the US Dollar.

Supply concerns stemming from the US-Iran standoff over the Strait of Hormuz lifted crude oil prices, supporting the commodity-linked Loonie and putting additional downward pressure on the USD/CAD pair. The upside for the US Dollar seems limited as traders still price in a greater chance of at least one Fed rate hike by year-end.