USD/CAD edges 0.12% lower to the 1.4080 area in Wednesday’s Asian session, pressured by a softer US Dollar as markets ramp up expectations of a December Federal Reserve rate cut. The US Dollar Index (DXY) holds near 99.70, extending Tuesday’s decline.
Fed dovish bets intensify
Markets now price an 85.3% chance of a 25 bps cut to 3.50%–3.75% in December, sharply higher than the 50.1% likelihood seen a week ago, according to the CME FedWatch tool. Dovish comments from New York Fed President John Williams further reinforced expectations, as he noted that monetary policy remains “modestly restrictive” and that slowing economic growth and a cooling labor market leave room for additional easing.
Soft US data adds pressure on USD
This week’s delayed data releases added to USD weakness. US core producer inflation softened in September, while Retail Sales posted only moderate gains—signals that align with a slower demand backdrop. Combined, these factors provide the Fed with more flexibility to loosen policy.
CAD steady as BoC seen on hold
The Canadian Dollar trades broadly stable as markets expect the Bank of Canada to keep rates unchanged after its October 25 bps cut brought the policy rate to 2.25%. While the BoC signaled the end of its easing cycle, analysts at Citi anticipate additional cuts in 2026 on expectations of softer growth and inflation.
Levels to watch
Near-term support sits at 1.4050, followed by 1.4000. On the upside, resistance is aligned at 1.4120 and the recent high near 1.4170.
