The loonie climbed 0.2% to trade at 1.4170 per U.S. dollar (or 70.57 U.S. cents), bouncing back from overnight market jitters to trade in a firm daily range of 1.4156 to 1.4210, News.Az reports, citing Reuters.
The primary catalyst for the rally was a sharp 5.2% jump in the price of crude oil—one of Canada’s most critical economic exports—which settled at $74.10 a barrel. The spike followed a highly volatile announcement from U.S. President Donald Trump, who declared at a NATO summit that the fragile interim peace agreement with Iran was officially “over” and warned that the United States was likely to unleash fresh military strikes.
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The threat of renewed hostilities in the Middle East rattled international equity markets, sparking fresh global anxieties over inflation and forcing investors to brace for a tighter era of central bank policies.
In Canada, this energy-driven shockwave has rapidly shifted domestic economic expectations. According to swap market data, investors have aggressively raised their bets on a Bank of Canada interest rate hike this year, with probability estimates jumping to 60%, up from just 40% a day prior.
The Canadian dollar’s resilient performance comes even as North American trade dynamics face ongoing headwinds. Just last week, the U.S. opted out of a clean, 16-year extension of the United States-Mexico-Canada Agreement (USMCA), choosing instead to trigger a more rigorous annual review process to tackle current trade deficits.
Despite that structural uncertainty, currency strategists note that the market’s declining premium for U.S. dollar calls indicates an underlying confidence that Canada can navigate the trade friction. Combined with a sharp rise in Canadian bond yields across the board—with the 10-year benchmark hitting its highest level since late May at 3.590%—the loonie is suddenly flashing modest upside potential in a highly unstable global economy.
