The U.S. dollar is trading nearly flat against major currencies as markets closely watch developments in the Middle East and the direction of oil prices. The greenback has been tracking crude moves, with Brent falling below $100 a barrel amid reports that the Strait of Hormuz could reopen if U.S. military tensions ease.
Federal Reserve officials are also reinforcing a cautious and hawkish policy stance. Chicago Fed President Austan Goolsbee has warned that supply shocks are becoming more frequent, while St. Louis Fed President Alberto Musso said earlier policy action could be less disruptive than waiting for inflation pressures to build.
In Canada, Bank of Canada Governor Tiff Macklem is taking a more cautious approach, warning that heightened uncertainty could weigh on business investment, consumer spending and fourth quarter growth. Meanwhile, rising expectations for Canadian rate hikes are putting additional upward pressure on yields and keeping currency markets focused on central bank policy.