The USD/CAD pair extended its decline for a second straight session on Wednesday, trading near 1.4000 during Asian hours. The Canadian Dollar (CAD) strengthened against the US Dollar (USD), buoyed by higher oil prices and renewed optimism in the energy market.
West Texas Intermediate (WTI) crude continued its upward momentum for the second day, last seen trading around $57.70 per barrel. The rally followed an American Petroleum Institute (API) report showing that US crude inventories dropped by 2.98 million barrels last week—the first drawdown in four weeks. The data signaled tighter supply conditions, supporting the oil-linked Loonie.
Further boosting sentiment, US President Donald Trump noted that India intends to scale back purchases of Russian oil, a move that could tighten global supply dynamics and provide additional support to crude prices.
Meanwhile, the US Dollar came under renewed pressure amid uncertainty stemming from the ongoing federal government shutdown, which has delayed the release of key economic indicators such as Nonfarm Payrolls (NFP). The prolonged deadlock—now in its fourth week—has eroded investor confidence and complicated the Federal Reserve’s (Fed) policy outlook.
The US Senate once again failed to pass a House-approved funding bill on Monday in a 50–43 vote, marking the 11th unsuccessful attempt to end the impasse. This has become the third-longest government funding lapse in US history.
According to a Reuters poll, 115 of 117 economists anticipate that the Fed will deliver a 25 basis-point rate cut at its October 29 meeting, lowering the benchmark range to 3.75%–4.00%. For the remainder of 2025, 83 economists expect two more cuts, while 32 project just one.
Overall, the USD/CAD pair remains biased to the downside as stronger oil prices and dovish Fed expectations lend near-term support to the Canadian Dollar, while uncertainty surrounding US fiscal and economic policy continues to weigh on the greenback.
