Canadian Dollar struggles as US-Iran negotiation optimism pressures Oil prices
USD/CAD trims part of its intraday gains on Thursday as traders react to fresh geopolitical headlines surrounding ongoing US-Iran negotiations. At the time of writing, the pair is trading around 1.3775, up nearly 0.20% on the day after hitting an intraday high near 1.3800 earlier in the day.
Iran’s ILNA news agency, citing Al Arabiya, reported that the final draft of a US-Iran agreement had been reached with mediation from Pakistan and could be announced within the next few hours. The report boosted optimism that both sides may be moving closer toward an agreement aimed at ending the conflict in the Middle East and reopening the Strait of Hormuz.
Following the headlines, the US Dollar retreated sharply after touching fresh six-week highs earlier in the American session. The US Dollar Index (DXY), which tracks the Greenback’s value against a basket of six major currencies, is trading around 99.16 after easing from an intraday high near 99.53.
However, the Canadian Dollar (CAD) struggles to capitalize on the broader US Dollar pullback as Oil prices also come under pressure, limiting the downside in USD/CAD. West Texas Intermediate (WTI) crude trades lower near $97 per barrel after earlier rallying toward $100, while Brent crude also pulls back from near $105 toward the $100 mark.
The Loonie tends to be sensitive to Oil price movements, as Canada is one of the world’s largest crude exporters.
Looking ahead, traders now await clearer signs on whether Washington and Tehran can reach a final agreement, as Iran’s nuclear program remains a key sticking point in negotiations. US President Donald Trump has maintained a hardline stance on Tehran’s nuclear ambitions and warned that military action could resume if no deal is reached.
On the data front, preliminary S&P Global Purchasing Managers Index (PMI) data released earlier on Thursday showed the US Composite PMI held steady at 51.7 in May, while the Manufacturing PMI rose to 55.3 from 54.5 previously, marking a 48-month high. The Services PMI Business Activity Index eased slightly to 50.9 from 51 in April.
Attention now turns to upcoming economic data releases due on Friday, including Canada’s Retail Sales figures and the University of Michigan’s (UoM) Consumer Sentiment and Inflation Expectations survey in the United States.
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
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