The Canadian Dollar (CAD) remained subdued near two-month lows against the US Dollar (USD), with the USD/CAD pair trading around 1.4200 during Asian hours on Wednesday. This marks the eighth consecutive day of gains for the US Dollar, positioning the pair near its highest levels in two months as the commodity-linked CAD faces significant headwinds from declining crude oil prices [1].
The pressure on oil prices intensified as Middle Eastern crude exports recovered toward pre-war levels, reaching 17.5 million barrels per day, or about 98% of baseline output. This supply boost was further supported by Saudi Arabia's partial restart of its East-West pipeline at roughly half capacity and continued covert tanker traffic through the Strait of Hormuz. Additional downward pressure came from the United States, where the government announced plans to release up to 40 million barrels from the Strategic Petroleum Reserve (SPR) to curb domestic fuel costs. Industry data also revealed a 1-million-barrel build in US crude inventories over the past week, reinforcing the bearish tone for crude [1].
On the economic front, Canadian growth showed signs of cooling as the third-quarter rebound lost momentum. Economists at NBC noted that the latest GDP report confirms a slowdown, although Statistics Canada’s preliminary estimate still points to a 0.2% increase in GDP in August, indicating continued, albeit moderate, economic expansion [1].
Meanwhile, the US Dollar gained further ground as market expectations for additional Federal Reserve rate hikes strengthened. According to the CME FedWatch Tool, traders are now pricing in nearly a 68% chance of a rate hike in October and a 95% likelihood of a quarter-point increase in December. Market participants are also focused on the upcoming US Nonfarm Payrolls report, with economists projecting 90,000 jobs added in September and the Unemployment Rate remaining steady at 4.1% [1].
CONCLUSION
The Canadian Dollar remains under pressure due to falling oil prices and a cooling domestic economy, while the US Dollar is buoyed by expectations of further Federal Reserve rate hikes. Market sentiment is negative for the CAD, with traders closely watching upcoming US economic data for further direction.