FX.co ★ Canadian Dollar Pressured by USD Strength

The Canadian dollar edged past 1.39 against the US dollar, retreating from its peak of 1.378—the strongest level since October—reached on May 6th, driven by a strengthening U.S. dollar. The Federal Reserve's decision to maintain its interest rate at 4.25–4.50%, combined with its cautious stance on persistent inflation and elevated unemployment risks, bolstered the USD. Concurrently, the Bank of Canada's Financial System Review highlighted systemic vulnerabilities arising from President Trump's tariff actions and the significant role of leveraged hedge funds in government bond markets, heightening expectations of further monetary easing by the BoC. Additionally, the announcement of the US–UK trade agreement further strengthened the dollar, while ongoing concerns around USMCA compliance maintained the potential for bilateral tariff issues.