USD/CAD is trading steadily around 1.4110 during Tuesday’s Asian session after posting gains in the previous trading day. The pair faces potential downside pressure as the US Dollar (USD) eases, weighed by growing expectations that the Federal Reserve (Fed) will cut rates in December following a fresh wave of dovish commentary from Fed officials.
According to the CME FedWatch Tool, markets are now assigning an 81% probability to a 25-basis-point rate cut at the December meeting, up from 71% just a day earlier.
Fed Governor Christopher Waller told Fox Business on Monday that his primary concern is a weakening labor market, noting that inflation is “not a big problem” given recent softness in employment data. Waller added that the September payrolls figure will likely be revised lower and warned that concentrated hiring is “not a good sign,” reinforcing his support for a near-term policy adjustment.
Waller’s comments echoed remarks from New York Fed President John Williams last Friday, which also tilted market expectations toward an earlier easing cycle. Williams indicated that rates could be lowered in the near term, ahead of this week’s key US data releases, including retail sales and producer prices.
Downside momentum for USD/CAD may remain limited as the commodity-linked Canadian Dollar (CAD) comes under pressure from declining oil prices. West Texas Intermediate (WTI) crude is trading near $58.70 at the time of writing.
Oil prices have weakened as the United States pushes a peace proposal aimed at ending the three-year conflict between Ukraine and Russia. Traders will also monitor the American Petroleum Institute’s (API) weekly crude inventory report due later on Tuesday.
