USD/CAD declines as Hormuz disruptions keep Oil elevated, US-Iran talks in focus

USD/CAD trades with a negative bias on Thursday, extending losses for a fourth straight day as elevated Oil prices support the commodity-linked Canadian Dollar (CAD), even as the US Dollar (USD) strengthens against most of its peers.

At the time of writing, USD/CAD is trading around 1.3708, its lowest level since March 23. Meanwhile, the US Dollar Index (DXY), which tracks the Greenback’s value against a basket of six major currencies, is trading near 98.20, snapping an eight-day losing streak. However, it remains close to six-week lows reached earlier this week.

Although crude prices have eased from recent highs on hopes that the US and Iran could reach a deal to end the war and reopen the Strait of Hormuz, uncertainty remains elevated. Supply through the Strait continues to face significant disruption amid a dual blockade by US forces and Iran, limiting a deeper pullback in Oil prices.

Iran is also tightening its grip on the Strait of Hormuz, with state media reporting that any planned transit tolls would be processed via Iranian banks, underscoring efforts to assert control over one of the world’s most critical energy chokepoints.

As a result, West Texas Intermediate (WTI) Crude Oil is rebounding after a three-day decline, trading around $90.50 at the time of writing. The Canadian Dollar remains sensitive to Oil price movements, given Canada’s status as a major crude exporter.

Looking ahead, traders await clearer confirmation of a second round of US-Iran peace talks after US President Donald Trump indicated that negotiations could resume this week, following last weekend’s talks in Islamabad that failed to produce a breakthrough.

Higher energy costs keep inflation concerns in focus globally. While Canada’s inflation remains below the Bank of Canada’s 2% target, policymakers are likely to adopt a wait-and-see approach as energy-driven inflation risks tilt to the upside.

In contrast, US inflation remains above the Federal Reserve’s 2% target, with March CPI rising to 3.3% YoY from 2.4%, tempering expectations for Fed easing and reinforcing the view that interest rates will remain unchanged in the near term.

On the data front, Initial Jobless Claims fell to 207K, below forecasts of 215K, while Industrial Production dropped 0.5% MoM in March, missing expectations of a 0.1% rise and reversing the prior 0.7% increase.