USD/CAD slowly rises above 1.3550, driven by stronger USD

The USD/CAD pair recovered some lost ground near 1.3580 in early Asian trading on Tuesday. The US dollar strengthened against the Canadian dollar (CAD) as investors focused on whether the conflict between Israel and Iran would escalate into a wider regional conflict.

Investors closely followed the latest developments in geopolitical risks following Israel's attack on Iran on Friday. Ongoing geopolitical tensions could support the dollar in the short term. However, there was some optimism on Monday that the situation would not escalate as Iran reportedly asked several countries, including Saudi Arabia, to urge US President Trump to put pressure on Israel to achieve an immediate ceasefire.

Canadian Prime Minister Mark Carney said on Monday that he had agreed with Trump that the two countries should reach a tariff agreement within 30 days.

On the other hand, a continued rise in crude oil prices could boost the commodity-linked Canadian dollar. Notably, Canada is the largest oil exporter to the United States and higher crude oil prices tend to have a positive impact on the value of the Canadian dollar.

US retail sales data for May will be in focus later on Tuesday. On Wednesday, the focus will turn to the Federal Reserve's (Fed) interest rate decision. Based on the latest U.S. inflation data, traders now see a nearly 80 percent chance that the Fed will cut interest rates in September, followed by another cut in October.