US Dollar Slumps Amid Fed Rate Hike Bets as Canadian Dollar Soars on Oil Prices

The US Dollar (USD) is struggling despite growing expectations of a Federal Reserve rate hike in September. The USD/CAD pair has depreciated as the Canadian Dollar gains strength, driven by rising crude oil prices. West Texas Intermediate crude is hovering near three-month highs around $90.50 per barrel, up nearly 10% from last week's surge following increased military activity around the Strait of Hormuz and a recent attack on Saudi Aramco’s Jazan facilities.

The strong August US jobs report has pushed Fed rate-hike odds above 60%, with Nonfarm Payrolls adding 162,000 jobs while the Unemployment Rate held steady. However, investors are now turning their attention to the upcoming US Producer Price Index and Consumer Price Index inflation figures due later this week.

The Canadian Dollar's strength is also attributed to rising interest rates set by the Bank of Canada, a relatively strong economy, and higher oil prices, which tend to increase demand for the local currency. The price of Oil is a key factor impacting the value of the Canadian Dollar, with petroleum being Canada’s biggest export.

Higher inflation tends to lead central banks to put up interest rates, attracting more capital inflows from global investors seeking a lucrative place to keep their money. This increases demand for the local currency, supporting the Canadian Dollar's recent gains.