Oil Surge Supports Loonie Amid Fed Rate Hike Bets

The Canadian dollar has found support from rising oil prices despite bets on a Federal Reserve rate hike. The USD/CAD exchange rate traded lower on Monday, down 0.15% at around 1.3810. West Texas Intermediate (WTI) US Oil surged above $90 after fresh strikes hit Saudi oil facilities in Jizan, Saudi Arabia.

The sharp rise in oil prices is supporting the Canadian dollar as Canada is a major oil producer and exporter. Higher oil prices tend to improve the country's export revenue outlook and strengthen demand for the Canadian currency. This factor helped the CAD withstand the impact of Friday's weak Canadian employment report.

On the other hand, the US dollar retains several sources of support. The strong Nonfarm Payrolls (NFP) report on Friday reinforced expectations that the Federal Reserve could raise interest rates at its September meeting. Geopolitical tensions also support the Greenback due to its safe-haven status.

Investors will now monitor developments in the conflict and oil prices while awaiting the next batch of US inflation data, including the Producer Price Index (PPI) on Thursday and Consumer Price Index (CPI) on Friday. These releases could provide fresh clues about the Fed's monetary policy path and influence the direction of the US dollar.