USD/CAD Rallies on Hawkish Fed Tone

The USD/CAD pair has continued its rally against the Canadian Dollar (CAD), trading near 1.3995 during early European trading hours on Friday. The US Dollar's (USD) gains are attributed to a hawkish tone from the US Federal Reserve (Fed), which raised interest rates by a quarter-percentage point at its September meeting and flagged more hikes in the coming months.

Traders will be keeping a close eye on Fed Governor Michelle Bowman's speech later on Friday for further cues. The Bank of Canada's (BoC) decision to keep interest rates steady has widened the gap with the Fed, making the USD more attractive to investors.

However, ongoing tensions in the Middle East could boost crude oil prices and lift the commodity-linked Loonie. As Canada is a major oil-exporting country, high crude oil prices generally have a positive impact on the CAD.