USD/CAD Soars as Canadian Dollar Loses Steam Amid Trade Tensions and Federal Reserve Expectations

A new trading week has begun for USD/CAD, and it's clear that the Canadian dollar is losing steam. The pair has gained nearly 0.7% over the last four sessions due to buying pressure driven by expectations of a more aggressive Federal Reserve and an ongoing trade dispute.

The US central bank's likely interest rate increase has raised inflationary pressures, justifying additional hikes in the coming months. Meanwhile, the Bank of Canada remains uncertain about its next move, with market expectations split between another rate hike or maintaining current rates.

This divergence supports the relative attractiveness of US assets and could widen further if the Federal Reserve maintains a more aggressive stance than the Bank of Canada. The Canadian dollar continues to struggle to regain lost ground due to demand for the US dollar remaining well supported by bond market appeal and expectations of restrictive monetary policy.