USD/CAD Holds Below 1.38 as Fed Rate Cut Bets and Oil Strength Lift the Canadian Dollar

The USD/CAD pair extended its losing streak for the third consecutive session on Thursday, hovering around 1.3760 during the Asian trading hours. The decline comes as the US Dollar weakens amid growing expectations of aggressive rate cuts by the US Federal Reserve.

Fed Policy Outlook Pressures the Dollar

Market pricing via the CME FedWatch Tool shows traders assigning nearly a 94% probability to a 25-basis-point rate cut in September. Notably, US Treasury Secretary Scott Bessent signaled that short-term rates should be 1.5–1.75% lower than the current 4.33%, suggesting a 50-bps cut in September is a strong possibility.

Adding to the dovish tone, US President Donald Trump reiterated his view that interest rates should be closer to 1%, stating they should be lowered by three to four percentage points to support economic growth.

Canadian Dollar Finds Support from Oil Prices

The Canadian Dollar, closely tied to commodity performance, is drawing strength from stable crude oil prices. Canada remains the largest oil exporter to the US, and oil’s recovery from recent lows has offered the CAD a lift.

West Texas Intermediate (WTI) futures climbed to $62.20, rebounding from a two-month low of $61.35. The gains were driven by a risk premium ahead of the scheduled meeting between President Trump and Russian President Vladimir Putin, with geopolitical tensions surrounding the Ukraine conflict keeping energy markets on edge.

Key Takeaway for Traders

With US monetary policy turning increasingly dovish and oil prices showing resilience, USD/CAD may face further downside pressure unless US yields recover or risk sentiment shifts. A sustained move below 1.3750 could open the door toward 1.3700 support, while a rebound above 1.3800 would be needed to revive bullish momentum.

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