USD/CAD drifts higher above 1.3550 on firmer US Dollar 

• USD/CAD edges higher to near 1.3580 in Tuesday’s early Asian session. 

• Persistent Middle East geopolitical tensions continue to support the US Dollar. 

• Traders await the US May Retail Sales data later on Tuesday for fresh impetus. 

The USD/CAD pair recovers some lost ground to around 1.3580 during the early Asian session on Tuesday. The US Dollar strengthens against the Canadian Dollar (CAD) as investors monitor the conflict between Israel and Iran for signs it could escalate into a broader regional conflict.  

Investors have been closely watching the developments surrounding geopolitical risks after Israel’s strike on Iran on Friday. The ongoing geopolitical tensions are likely to underpin the Greenback in the near term. Nonetheless, there was some optimism on Monday that the situation wouldn’t escalate after Iran reportedly asked several countries, including Saudi Arabia, to urge US President Donald Trump to put pressure on Israel for an immediate ceasefire.  

Canadian Prime Minister Mark Carney said on Monday that he had agreed with Trump that their two nations should try to wrap up a deal on tariffs within 30 days.  

On the other hand, extended gains in Crude Oil prices might boost the commodity-linked Loonie. It’s worth noting that Canada is the largest oil exporter to the US, and higher crude oil prices tend to have a positive impact on the CAD value. 

The US May Retail Sales data will be in the spotlight later on Tuesday. On Wednesday, the attention will shift to the Federal Reserve (Fed) interest rate decision. Based on the latest US inflation data, traders now see a nearly 80% possibility of a Fed rate cut in September, followed by another one in October, according to Reuters.