USD Rebound Pushes USD/CAD Higher Amid Waning Oil Price Gains

The US Dollar (USD) rebounded on Monday after opening the week with a bearish gap, causing USD/CAD to edge higher and pare earlier losses. The Greenback initially weakened as a temporary pause in attacks between the United States (US) and Iran improved risk sentiment.

Oil prices have erased most of last week’s gains in response to the pause, weighing on the commodity-linked Canadian Dollar (CAD). West Texas Intermediate (WTI) trades near $82.70 per barrel after hitting an intraday low of $81.28, but is still down more than 7% on the day.

The Loonie has received only limited support from higher Oil prices since the US-Iran war began, as USD/CAD remains driven mainly by US Dollar flows and monetary policy expectations amid heightened energy-driven inflation risks.