Canadian Dollar steadies as US Dollar holds ground amid market caution

USD/CAD remains stronger for the fourth successive day, trading around 1.3990 during the Asian hours on Tuesday. The pair is holding its ground as the US Dollar (USD) stabilizes ahead of further developments regarding US-Iran peace talks. Because neither Washington nor Tehran has released the official text of the agreement, major shipping lines are delaying vessel reroutings through the strategic waterway until full transparency is established.

The USD/CAD pair may appreciate further as the commodity-linked Canadian Dollar (CAD) struggles against a backdrop of lower oil prices. Even though US President Donald Trump announced that a memorandum of understanding (MoU) has been signed to end the conflict and reopen the blockaded Strait of Hormuz, market participants remain deeply cautious. According to Iran's semi-official Mehr news agency, the current draft calls for the strait to reopen within 30 days under Iranian arrangements.

On the macro front, lower oil prices are easing concerns that an energy-driven inflation spike could trigger a hawkish shift by global central banks. Bond yields have also declined, reducing worries over elevated borrowing costs from the Bank of Canada (BoC).

Meanwhile, the Federal Reserve is widely expected to keep its benchmark interest rate unchanged at a target range of 3.50% to 3.75% at its upcoming policy meeting on Wednesday. Traders will be closely monitoring the press conference for cues on how new Fed Chair Kevin Warsh intends to lead the central bank into its next era.