The USD/CAD pair remains under mild selling pressure, trading near 1.3990 during Thursday’s Asian session. The Canadian Dollar (CAD) is gaining ground against the US Dollar (USD), buoyed by a rally in crude oil prices and investor focus on Canada’s upcoming Retail Sales data.
Crude oil prices advanced to nearly a two-week high after the United States imposed sanctions on major Russian oil companies. The move has bolstered oil-linked currencies like the Loonie, acting as a headwind for the USD/CAD pair. Given that Canada is the largest oil exporter to the United States, higher crude prices typically support the CAD.
Adding to market attention, Canadian Prime Minister Mark Carney stated on Thursday that the long-standing process of deepening economic ties between Canada and the United States has effectively ended. Investors will closely watch for any developments that may escalate US-Canada trade tensions.
Meanwhile, in the US, President Donald Trump has declined to meet with Democratic lawmakers until the ongoing government shutdown—now entering its fourth week—comes to an end. The delay in key economic data releases from the Bureau of Labor Statistics and the Census Bureau continues to cloud the Federal Reserve’s (Fed) policy outlook.
Despite the uncertainty, the Fed is widely expected to cut its benchmark interest rate by 25 basis points (bps) at both its October and December meetings. According to LSEG data, Fed funds futures are pricing in a 97% probability of a rate reduction, weighing further on the Greenback.
Looking ahead, traders will turn their attention to Canada’s Retail Sales figures due later on Thursday. Consensus estimates point to a 1.0% month-on-month (MoM) rise in August, while core Retail Sales (excluding autos) are expected to increase by 1.2% MoM. A stronger-than-expected reading could offer additional support to the Canadian Dollar in the near term.
