USD/CAD Approaches 1.3700 as Fed Holds Rates, Geopolitical Tensions Persist

USD/CAD Gains Toward 1.3700 as Fed Holds Rates and Investors Monitor Middle East Tensions

The USD/CAD pair advanced toward 1.3700, reaching approximately 1.3695 during early Asian trading on Thursday. This marks the third consecutive day of gains, fueled by the Federal Reserve’s decision to hold rates and a backdrop of ongoing geopolitical instability in the Middle East.

Fed Holds Rates, Signals Divided Outlook

The Federal Open Market Committee (FOMC) kept the benchmark interest rate steady at 4.25%-4.50% during its June 2025 meeting. While the Fed signaled it still expects two interest rate cuts in 2025, updated projections showed growing division among policymakers.

Key updates from the Fed's outlook include:

• Inflation forecast raised to 3.0% (from 2.7%) by end-2025
• Growth forecast cut to 1.4% (from 1.7%)
• Unemployment Rate revised upward to 4.5%

📖 Related: Full June 2025 FOMC Summary

These developments boosted the US Dollar (USD), pushing the USD/CAD pair higher amid increased investor appetite for the greenback.

Geopolitical Risks Keep Markets on Edge

Markets are also reacting to remarks from former US President Donald Trump, who said he remains cautious regarding a potential US military response to Iran, though he confirmed discussions with his advisers regarding the Israel-Iran conflict.

This cautious stance helped ease some risk-off sentiment, but tensions remain elevated, maintaining support for the USD as a safe-haven currency.

Learn more: How Geopolitics Affect Forex Markets

USD/CAD Technical Outlook

The pair is nearing the 1.3700 resistance level, a key psychological and technical area. A firm break above this level could open the door to further upside toward 1.3750. On the downside, support lies at 1.3650.

Check out our Live USD/CAD Chart and Forecasts

Conclusion

The combination of Fed’s hawkish hold, elevated inflation expectations, and ongoing global tensions continues to support USD/CAD in the short term. Traders will be closely watching developments in the Middle East and upcoming US data releases to assess further movement.