USDCAD maintains strength near 1.4250 as hawkish Fed policy expectations and declining oil prices offset potential support from Canadian inflation data.
After hotter-than-expected US CPI, markets price an ~87% chance of a December Fed rate hike and ~13% of a 50bp move, keeping the USD supported. TD Securities explicitly sees room for USD to rally against CAD near-term, with diverging employment data keeping USDCAD above 1.40. CAD-side support from a possible BoC hike (Canada inflation 3.1% in September) and Democratic mid-term victory easing trade pressures partially offsets this.
Oil has pulled back as the US and Iran appear to avoid further escalation, while OPEC's monthly report showed OPEC+ crude production surged by roughly 2.04 million barrels per day in October to 41.23 million barrels per day, driven largely by higher Saudi output. Rising supply and reduced geopolitical risk pressure prices. Falling oil also weighs on the commodity-linked CAD, indirectly reinforcing the USD/CAD uptrend.
The USD/CAD pair remains supported above 1.40 as markets price in an 87% probability of a December Federal Reserve rate hike. Diverging employment data and a surge in OPEC+ crude production to 41.23 million barrels per day in October are creating headwinds for the Canadian Dollar, despite domestic inflation reaching 3.1% in September.
A potential Bank of Canada rate hike, with Canadian inflation at 3.1% in September, is supporting the CAD, and the Democratic mid-term victory may ease trade pressures on Canadian growth.
Supply has expanded, with OPEC+ output up roughly 2.04 million barrels per day in October to 41.23 million bpd, and the US and Iran appear to be avoiding further escalation, removing geopolitical risk support.
Oil is Canada's largest export, so falling crude prices act as a headwind for the commodity-linked Canadian dollar and help keep USD/CAD supported.