US Dollar Gains Traction as Trade Tensions Weigh on Canadian Currency

The Canadian dollar has been showing signs of weakening momentum in recent trading sessions, with the USD/CAD pair gaining nearly 0.7% over the last four days.

This trend is attributed to expectations of a more aggressive Federal Reserve and ongoing trade tensions between Canada and the US, which continue to weigh on the Canadian dollar's relative attractiveness.

With the CME Group's probability tracker assigning more than a 50% chance that interest rates will rise another 0.25% to 4.25% at the October 28 meeting, markets are pricing in a more restrictive monetary policy from the Federal Reserve, supporting the US dollar's strength.

The Canadian dollar has struggled to regain lost ground consistently, and as long as market expectations of a more aggressive Fed persist, buying pressure around USD/CAD could continue to play a relevant role in the sessions ahead.