USD/CAD has depreciated, trading around 1.3802, near a six-month low during Asian hours on Monday. This decline is due to a weaker US Dollar, impacted by concerns over US economic conditions stemming from US tariffs. The US Dollar Index, measuring the USD against six major currencies, decreased over 0.50%, reaching approximately 98.50, its lowest since April 2022. The USD struggles as the 2-year yield on US Treasury bonds drops more than 1%, standing at 3.75%. Federal Reserve Chair Jerome Powell noted that a sluggish economy with persistent inflation could hinder the Fed’s efforts, raising stagflation risks. Political reports indicated President Trump was unhappy with Powell’s performance, contemplating his removal, although markets had a muted response. The downside for the USD/CAD pair may be limited due to potential CAD pressure from declining crude Oil prices. West Texas Intermediate Oil prices fell over 1%, trading around $62.80 per barrel, following progress in US-Iran nuclear negotiations. The Canadian Dollar is influenced by the Bank of Canada’s interest rates, Oil prices, economic health, inflation, and Trade Balance. Key economic indicators and global market sentiment also play a role in determining CAD’s trajectory. Looking at the broader context, the recent weakening in USD/CAD points to a combination of lower US bond yields and investor uncertainty around future monetary policy. With Powell flagging the dual threat of slowing growth alongside persistent price pressures, fears of stagflation are now beginning to take hold. Normally, we’d see tighter policy talk lift the Dollar, but the bond markets have taken matters into their own hands, pushing yields lower in anticipation that rate hikes have peaked—or that easing might even be brought forward. What we’re observing here is not just a blip. The US Dollar Index dropping to its weakest level in over two years signals a change in how markets are pricing the strength and reliability of the greenback. As 2-year Treasury yields slip well below where they’ve been, capital is showing signs of flowing out of Dollar-denominated assets. Historically, collapses in short-term yield support create near-term selloffs for the Dollar, especially against currencies tied to other commodities or carrying more stable rate expectations. While downside pressure on USD/CAD has been clear over the past sessions, we can’t ignore what’s happening with Oil. The pullback in WTI below $63, driven in part by diplomatic shifts in US-Iran relations, puts direct strain on the Canadian Dollar. For derivative traders, that connection is key. Though USD weakness is the main story, CAD isn’t strengthening across the board; it’s simply not weakening fast enough to extend USD/CAD losses further, at least not without a fresh catalyst. Macklem’s policies and commentary have yet to shift notably in response to rising global uncertainty, which means fixed-income markets are watching Canadian data with a sharper lens. Inflation readings from Canada will matter more in the weeks ahead than the usual noise—anything signalling slowdown could add to downward pressure on CAD, especially if Oil continues retreating. We’re now entering a period where positioning becomes more aggressive ahead of event risks. If US economic data continues to deteriorate—especially labour market or consumer spending prints—it could accelerate selling in the Dollar, betting that Powell and colleagues will signal a dovish pivot. That would feed directly into further declines in USD/CAD, possibly testing levels unseen since the start of the year. اکنون تجارت را شروع کنید – برای ایجاد حساب VT Markets زنده خود اینجا را کلیک کنید