USD/CAD consolidates above 1.3500 ahead of busy US data week

• USD/CAD wobbles above 1.3500 as US labor market data takes center stage.
• Fed Powell pushed back market speculation for large rate cuts in November.
• The Canadian Dollar will be influenced by the S&P Global Manufacturing PMI data for September.

The USD/CAD pair trades in a tight range above the psychological support of 1.3500 in Tuesday's European session. The Loonie asset turns sideways as investors await the United States (US) labor market and the Purchasing Managers' Index (PMI) data, which will indicate whether the Federal Reserve (Fed) will continue with an aggressive monetary policy stance or shift to a gradual rate cut path.

Market sentiment appears to be cautious as S&P 500 futures have posted nominal losses in European trading hours. The US Dollar Index (DXY), which tracks the Greenback's value against six major currencies, extends recovery to near 101.00.

According to the CME FedWatch tool, the probability of the Fed reducing interest rates by 50 basis points (bps) to 4.25%-4.50% in November, as they did on September 18, has eased to 35% from 58% a week ago.

Market expectations for the Fed's large rate cut have slightly waned after Fed Chair Jerome Powell's speech at the National Association for Business Economics conference on Monday, in which his comments indicated that the central bank is in no rush to reduce rates quickly. Powell expects that there will be two rate cuts of 25 bps in each of the remaining two meetings this year, if the economy performs as expected.

Going forward, investors will focus on the US ISM Manufacturing PMI for September and the JOLTS Job Openings data for August, which will be published at 14:00 GMT.

Meanwhile, the Canadian Dollar (CAD) will be guided by the S&P Global Manufacturing PMI data for September, which is scheduled for release at 13:30 GMT. The Manufacturing PMI has been correcting for 16 straight months.