USD/CAD is firm and holding onto mild gains this Friday in the Asia Market. It is holding near 1.4030. The US Dollar’s getting a little lift, but not much—everyone’s still betting on a Federal Reserve rate cut in December. All eyes are also on Canada’s Q3 GDP numbers, set to drop later today. That release could shake things up for the pair.
Fed’s Dovish Comments Fuel Rate-Cut Bets
Lately, top Fed officials have made it pretty clear they’re leaning toward easing. San Francisco Fed President Mary Daly openly backed a rate cut, citing a soft labor market. Christopher Waller, the governor of the Fed, agreed, stating that a 25 basis point cut is warranted due to the poor state of the labor market. Of course, they’ll still watch the data. But the market’s already made up its mind. The CME FedWatch Tool shows traders are pricing in an 87% chance of a December rate cut—way up from just 39% last week. That keeps the US Dollar afloat, but it’s not enough to push it much higher.
Oil Slide Hurts Canadian Dollar
On the Canadian side, falling oil prices are weighing on the Loonie. Oil’s been slipping as hopes rise for a ceasefire between Russia and Ukraine, which takes some of the risk premium out of the market. And since Canada sends so much oil to the US, a weaker oil price tends to drag the CAD down, giving USD/CAD more support.
In short, with the Fed’s dovish stance and softer oil prices, USD/CAD looks set to stay above 1.4000 for now. Traders will be watching Canada’s data for the next move.
