Canadian Dollar Under Pressure as Fed Hike Expectations Rise

The Canadian dollar has shown renewed weakness against the U.S. dollar in recent days, leading to gains for USD/CAD of over 0.2%.

This trend is attributed to ongoing uncertainty surrounding trade tariffs between Canada and the United States, as well as expectations around a potential interest rate hike from the Federal Reserve.

The market has assigned a probability of 62% that there will be no change in interest rates at this week's decision, while a possible hike now stands near 38%.

Additionally, with the Bank of Canada maintaining a neutral outlook and the U.S. 10-year Treasury yield nearing 2026 highs, USD-denominated investments may continue to preserve their relative advantage.