USD/CAD ended its five-day winning streak, trading around 1.3920 during Asian hours on Monday. The pair retreated after hitting a four-month high of 1.3958 on Friday, as the US Dollar (USD) weakened following softer inflation expectations that reinforced bets on a Federal Reserve (Fed) rate cut in October.
US inflation and Fed outlook
The US Personal Consumption Expenditures (PCE) Price Index rose 2.7% year-over-year in August, compared with 2.6% in July, in line with expectations. Core PCE, which excludes food and energy, increased 2.9% annually, also matching forecasts.
Markets now assign an 88–90% probability of a Fed rate cut in October, with a 65% chance of an additional reduction in December, according to the CME FedWatch Tool. The Greenback also faces pressure from heightened risks of a US government shutdown.
US government shutdown risks weigh on USD
President Donald Trump is set to meet congressional leaders on Monday to negotiate government funding. Without a deal, parts of the US government could shut down on October 1, coinciding with new tariffs on trucks, pharmaceuticals, and other goods. The standoff could delay the September payrolls report and other key economic data, Reuters reported.
Canadian Dollar and oil prices in focus
The Canadian Dollar (CAD), a commodity-linked currency, struggles to extend gains as crude oil prices remain subdued. West Texas Intermediate (WTI) crude trades around $65.00 per barrel on Monday.
Oil prices eased after Iraq’s Kurdistan region resumed exports following a 2.5-year suspension. Under a new agreement with Baghdad and international oil firms, around 180,000–190,000 barrels per day (bpd) are set to flow to Turkey’s Ceyhan port, adding supply to an already fragile market.
