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- USD/CAD posts modest gains near 1.3980 in Monday’s Asian session.
- Hassett’s nomination would be bearish for the US Dollar as he is seen as a dovish candidate.
- Canadian GDP surpassed forecasts, expanding at an annualized pace of 2.6% in Q3.
The USD/CAD pair recovers some lost ground to around 1.3980 during the Asian trading hours on Monday. The potential upside might be limited amid rising bets of a US Federal Reserve (Fed) rate cut this month. Traders brace for the US November ISM Manufacturing Purchasing Managers Index (PMI) report later on Monday for fresh impetus.
Investors ramp up expectations of a US rate cut in the December policy meeting following dovish remarks from Fed officials and a slew of weaker-than-expected US economic data. This, in turn, could weigh on the US Dollar (USD) against the Canadian Dollar (CAD) in the near term. Traders are now pricing in an 87% odds the Fed will cut by 25 basis points (bps) when it meets next week, according to the CME FedWatch tool.
Additionally, a report that White House economic adviser Kevin Hassett has emerged as the frontrunner to be the next Fed chair might contribute to the Greenback’s downside. Hassett is seen as a close ally who supports US President Donald Trump’s call for quicker and deeper interest rate reduction to stimulate the economy.
On the Loonie front, stronger-than-expected Canadian quarterly Gross Domestic Product (GDP) data prompted traders to reduce bets of additional easing from the Bank of Canada (BoC) in the current rate-cutting campaign, supporting the CAD. Canada’s economy grew at an annualized pace of 2.6% in the third quarter (Q3), compared to a contraction of 1.8% (revised from -1.6%) in Q2, Statistics Canada showed on Friday. This reading came in better than the estimation of a growth of 0.5%.
