• USD/CAD holds near fourteen-month highs as markets shrug off strong Canadian inflation data.
• Hawkish Fed expectations contrast with the Bank of Canada's steady policy stance.
• Traders turn their attention to BoC Governor Tiff Macklem's speech and US PCE inflation data.

USD/CAD trades little changed on Monday after a brief bout of weakness following stronger-than-expected Canadian inflation data. At the time of writing, the pair is trading around 1.4165, hovering near its highest level since April 2025.

Higher gasoline prices continued to drive the acceleration in headline inflation in May, with annual Consumer Price Index (CPI) inflation rising to 3.2% from 2.8% in April, Statistics Canada reported.

However, the Canadian Dollar (CAD) failed to gain traction as markets focused on stable core inflation rather than the hot headline print. The Bank of Canada's (BoC) core CPI rose to 2.2% YoY in May from 2.1%.

The data suggests the BoC is likely to maintain its current policy settings and keep interest rates on hold. This contrasts sharply with the Federal Reserve (Fed), where markets have increasingly priced in the possibility of a rate hike by year-end following last week's monetary policy meeting. In his first meeting as Fed Chair, Kevin Warsh emphasized the central bank's commitment to restoring price stability.

The Fed's hawkish stance is keeping the US Dollar (USD) supported even as risk sentiment improves amid progress in US-Iran negotiations. The US Dollar Index (DXY), which tracks the Greenback's value against a basket of six major currencies, is trading around 101, near its highest level in thirteen months.

Meanwhile, the decline in Oil prices due to US-Iran optimism is adding further pressure on the commodity-linked Loonie. With diverging monetary policy outlooks, a strong US Dollar and softer Oil prices, the Canadian Dollar remains vulnerable to further losses.

Looking ahead, the Canadian economic calendar remains empty for the rest of the week, with BoC Governor Tiff Macklem scheduled to speak on Tuesday. In the United States, attention will turn to the Personal Consumption Expenditures (PCE) Price Index later this week, which could provide fresh clues on the Fed's monetary policy path.