Loonie Takes Another Hit as US Treasury Yields Surge
The Canadian Dollar continues to sink as US Treasury yields rise, widening the interest-rate advantage for the greenback. The USDCAD pair opened at 1.4145 and traded in a range of 1.4134-1.4154 overnight, closing at 1.4139. The surge in US Treasury yields has markets pricing three Fed rate increases by March 2027, a path that may be difficult for the Bank of Canada to match given the weakness in the Canadian economy and additional drag from Trump's tariffs.
The jump in US Treasury yields also pushed the US 10-year yield to 5.19%, its highest since 2007. This has improved risk sentiment, with markets hoping that a US/Iran deal could lead to an eventual reopening of the Strait of Hormuz and a boost to oil prices.
The recent rally in oil prices has given back some ground, with WTI falling from $96.75 to $93.00. However, traders remain optimistic about the potential for a US/Iran agreement, which could lead to increased trade and economic activity.