USD/CAD Falls Toward 1.3650 as Oil Prices and Trade Optimism Boost Canadian Dollar

USD/CAD Slips Near 1.3650 as Canadian Dollar Gains on Trade Progress and Oil Strength

Loonie Strengthens on Digital Tax Suspension and Trade Talks

The Canadian Dollar (CAD) gained ground early Monday, driving USD/CAD lower to around 1.3650, following Canada's decision to withdraw its proposed digital services tax. The Finance Ministry’s move is seen as a goodwill gesture to support broader trade negotiations with the US, with a July 21 deadline set for a potential agreement.

Oil Prices Fuel CAD as Crude Rallies Above $64

The commodity-linked CAD also found support from higher West Texas Intermediate (WTI) crude prices, which hovered around $64.70 per barrel. As Canada is the largest crude exporter to the US, rising oil prices generally boost the Canadian currency.

While the Middle East ceasefire has reduced supply disruption fears, possible sanctions relief on Iran and an expected OPEC+ output hike of 411,000 barrels per day in August may limit oil's upside.

Market Focus Shifts to US Labor Data and Fed Outlook

Meanwhile, the US Dollar remains pressured as traders await key labor market data for further cues on the Federal Reserve's policy path. Weak job data could reinforce the narrative of rate cuts in September, weighing further on the USD.

Internal Linking Suggestions:

• Understanding USD/CAD and Oil Correlation
• Canada Suspends Digital Services Tax Ahead of Trade Deal
• What’s Next for Fed Policy? Key US Labor Data Preview