USD/CAD Rally Continues as Fed Hike Expectations Soar

Recent trading sessions have been unfavorable for the Canadian dollar. The USD/CAD exchange rate has recorded four consecutive bullish sessions, accumulating gains of more than 1% in favor of the U.S. dollar. This move highlights a relevant bullish bias within the market and shows that buying pressure continues to dominate in the short term.

The strength of the U.S. dollar has been supported by growing expectations that the Federal Reserve could adopt a more aggressive stance, leading to increased demand for U.S. dollars. As long as these expectations continue gaining relevance, the Canadian dollar may struggle to recover lost ground, allowing buying pressure around USD/CAD to remain important.

Market expectations regarding the upcoming Federal Reserve decision have shifted notably, with current probability estimates suggesting a more than 90% chance of an interest rate increase from 3.75% to 4%. This change reflects that markets are once again pricing in a more aggressive Federal Reserve, which could influence the strength of the U.S. dollar in the near term.