Overview
- The Canadian dollar climbed to about 1.40 per U.S. dollar on Friday, marking its strongest level since mid-June as oil jumped to roughly $82.50 a barrel and the weekly move was its largest since April.
- U.S. consumer inflation data released this week was softer than expected, which pushed the CME FedWatch probability of a July rate increase down to about 10 percent and reduced short-term U.S. versus Canadian yield differentials.
- Canada’s 2-year yield gap with the United States narrowed to near mid-June levels, which, combined with the Bank of Canada’s hawkish 2.25 percent policy stance, made Canadian government debt relatively more attractive and helped lift the loonie.
- Escalating U.S.–Iran strikes and disruption to Strait of Hormuz shipping drove a roughly 4–4.5 percent spike in U.S. crude and prompted safe-haven flows that kept the dollar index near 100.7 and kept pressure on global markets.
- Higher oil and a firmer U.S. dollar are weighing on gold and other precious metals in the near term, while traders warn of elevated intervention risk for the yen after officials signaled readiness to act as the currency nears 162 per dollar.