The USD/CAD pair trades in positive territory around 1.3915 during the early European trading hours on Tuesday. The Greenback strengthens against the Canadian Dollar (CAD) amid uncertainty surrounding a potential Tuesday deadline set by the US for military action against Iranian infrastructure if the Strait of Hormuz is not reopened.
US President Donald Trump said on Monday that Iran’s response to the US ceasefire proposal, conveyed through intermediaries, is “significant” but “not good enough.” He warned of the “complete demolition” of Iran’s power plants and bridges in a matter of hours if the Strait of Hormuz is not fully reopened by his deadline. Persistent tensions in the Middle East could boost a safe-haven currency such as the US Dollar (USD) in the near term.
Meanwhile, rising crude oil prices could provide some support to the commodity-linked Loonie. It is worth noting that Canada is a major oil-exporting country, and higher crude oil prices generally have a positive impact on the CAD.
Data released by the Institute for Supply Management (ISM) on Monday showed that the Services PMI fell to 54.0 in March, compared to 56.1 in February. This reading came in weaker than expected at 55.0, signalling some loss of momentum in the sector.
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