- USD/CAD falls as the US Dollar (USD) loses ground over expectations of two more Federal Reserve rate cuts in 2026.
- Markets brace for President Trump to nominate a new Fed chair in May, potentially favoring lower interest rates.
- The CAD receives support as Oil prices rise on supply concerns amid geopolitical concerns.
USD/CAD pares recent gains from the previous session, trading around 1.3710 during the Asian hours on Friday. The pair depreciates as the US Dollar (USD) loses ground over expectations of two more Federal Reserve rate cuts in 2026.
Markets are bracing for US President Donald Trump to nominate a new Fed chair to replace Jerome Powell when his term ends in May, a move that could tilt monetary policy toward lower interest rates. Federal Open Market Committee (FOMC) December Meeting Minutes indicated that most participants judged that it would likely be appropriate to stand on further rate cuts if inflation declined over time. Meanwhile, some Fed officials said it might be best to leave rates unchanged for a while after the committee made three rate reductions in 2025 to support the weakening labor market.
The Canadian Dollar (CAD) receives support as the recent Bank of Canada (BoC) communications indicated noncommittal on further tightening, with a growing bias toward holding rates. Statistics Canada reported a 0.3% contraction in real GDP in October, confirming that growth momentum cooled into Q4. S&P Global Canada Manufacturing Purchasing Managers’ Index (PMI) for December will be eyed later in the day.
The commodity-linked Canadian Dollar receives support against the US Dollar amid higher Oil prices, given Canada’s status as the largest crude exporter to the United States (US). Oil prices could edge higher on potential supply concerns amid escalating geopolitical tensions.
Ukrainian drones reportedly struck Russian Oil facilities, while Russia and Ukraine exchanged accusations of civilian attacks on New Year’s Day, despite intensive talks overseen by US President Donald Trump aimed at ending the nearly four-year conflict.
Reuters reported that the US Treasury Department announced sanctions on Wednesday against Oil traders accused of helping Venezuela’s Maduro government evade restrictions, including four tankers allegedly part of a so-called “shadow fleet.”
West Texas Intermediate (WTI) Oil price holds ground after registering modest losses in the previous trading session, hovering near $57.60 at the time of writing. Traders are awaiting Sunday’s virtual meeting of the Organization of the Petroleum Exporting Countries and its allies (OPEC+), with expectations that the group will uphold its November decision to pause further production increases.
