The U.S. dollar may strengthen as investors worry that the Federal Reserve (Fed) will not cut interest rates this year. The CME FedWatch tool indicates that the probability of interest rates remaining steady after the September meeting has increased to 51% from 38%.

Additionally, Fed policymakers continue to hold a pessimistic view regarding interest rates, as they believe that a single instance of reduced inflation data in April is insufficient to ensure significant inflation pressure reduction.

Meanwhile, the Canadian dollar may come under pressure as investors expect the Bank of Canada (BoC) to begin lowering interest rates at its June meeting. Weak retail sales and ongoing reduced price pressures have fueled expectations of a rate cut by the BoC.