US Dollar Gains Ground as Fed Hike Bets Boost Greenback

The Canadian Dollar is retreating against its US counterpart as traders bet on an upcoming Federal Reserve interest rate hike. This move has bolstered the Greenback, sending the US Dollar Index (DXY) to a two-week high of 99.72.

At the same time, trade tensions between the United States and Canada remain elevated following the imposition of tariffs on C$27.6 billion worth of Canadian goods. The Bank of Canada is expected to keep interest rates unchanged at 2.25% on Wednesday, according to consensus estimates.

The Fed's hawkish stance on inflation has revived expectations of a rate hike in September, with traders assigning a 65% probability to the event. This development supports the US Dollar and pushes up US Treasury yields, with the benchmark 10-year yield reaching 4.80%, its highest level since January 2025.