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USD/CAD holds near 1.4100 as hawkish Fed bets offset oil uncertainty
Market pricing for a 25-basis-point Fed hike in October rose to nearly 69.7% from 48.7% last week, supporting the US dollar.
FXStreet reports USD/CAD steadied after three straight sessions of gains, trading around 1.4100 during Thursday’s Asian hours. The Canadian dollar held its ground as oil price uncertainty kept sentiment cautious, limiting near-term movement in the pair.
FXStreet also links the backdrop for CAD to wider spreads and Q4 seasonality. Strategists at Scotiabank warned that “wide spreads” are a drag on the CAD’s fundamental performance and cited negative CAD seasonality in Q4 as a risk for stronger headwinds ahead of year-end.
On the US side, FXStreet points to hawkish Fed expectations and resilient domestic data. Following Flash US S&P Global PMI for September showing manufacturing expanding faster than expected at 52.0, expectations for a 25-basis-point Fed rate hike in October jumped to nearly 69.7%, up from 48.7% last week.
FXStreet adds that traders are looking ahead to the US weekly Initial Jobless Claims report, while recent Fed communication continued to emphasize persistent inflation risks. It notes Barr delivered a hawkish message, with an FXS Speechtracker score of 8/10, suggesting a stronger-than-usual tightening bias and indicating further hikes may be needed to return inflation to 2%.