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2026-07-14 12:06:10
[Rising Oil Prices Boost Canadian Dollar, But Interest Rate Hike Expectations Limit Gains] 1. On Tuesday in Asian trading, the USD/CAD pair continued its decline to around 1.4130, marking its fifth consecutive day of losses. Trump's announcement of restoring the naval blockade against Iran and imposing a 20% toll on passage through the Strait of Hormuz pushed oil prices sharply higher, boosting the currency of Canada, the largest oil supplier to the United States. 2. The Strait of Hormuz carries nearly one-fifth of the world's oil supply, and Trump's proposed toll exacerbated concerns about supply disruptions. Stronger oil prices directly benefited the Canadian dollar through improved trade terms. 3. However, rising expectations of a Federal Reserve interest rate hike limited the Canadian dollar's upside potential. CME FedWatch showed that the probability of a July rate hike had risen to 46.5%. Inflation concerns formed the core logic, with the market focusing on Tuesday's US CPI data and Federal Reserve Chairman Warsh's congressional testimony. 4. The Bank of Canada is expected to keep interest rates unchanged at 2.25% on Wednesday. Better-than-expected Canadian employment data in June provided fundamental support for the Canadian dollar. The short-term direction of the exchange rate will depend on the CPI data and Warsh's speech. If inflation exceeds expectations, the exchange rate may rebound to above 1.4200; conversely, it may fall to 1.4100.
