The USD/CAD pair is gaining ground, trading around 1.4030 during Monday’s Asian hours, following slight losses in the previous session. The pair’s advance is primarily driven by the struggles of the commodity-linked Canadian Dollar (CAD), which is weakening due to lower crude oil prices.
West Texas Intermediate (WTI) crude oil prices are retreating to approximately $59.30 per barrel at the time of writing, after a more than 2% gain in the prior session. This depreciation in crude prices is fueled by looming oversupply concerns. Notably, Russia’s Novorossiysk port has resumed oil loading operations after a two-day shutdown caused by a Ukrainian drone strike. Concurrently, the International Energy Agency (IEA) has warned of a potential substantial global oil surplus next year, possibly reaching around 4 million barrels per day (bpd), as both OPEC and non-OPEC producers increase output amid slowing demand growth.
Traders generally anticipate the Bank of Canada (BoC) to maintain its current interest rates at least until the end of 2026; however, this outlook could shift if economic conditions worsen. The BoC’s Consumer Price Index (CPI) data for October is scheduled for release later today.
The USD/CAD pair is also supported by the strengthening US Dollar (USD), which is benefiting from cautious statements made by US Federal Reserve (Fed) officials. On Friday, Kansas City Fed President Jeffery Schmid indicated that monetary policy should “lean against demand growth” and described the current Fed policy as “modestly restrictive,” which he believes is appropriate.
According to the CME FedWatch Tool, financial markets are now pricing in a 46% chance that the Fed will cut its benchmark overnight borrowing rate by 25 basis points (bps) at its December meeting. This represents a decrease from the 67% probability observed by markets just a week ago.