USD/CAD posts modest gains above 1.3700 ahead of US CPI data

• USD/CAD edges higher to near 1.3710 in Thursday's early Asian session. 
• Fed Minutes said a 50 bps rate cut was backed by the majority of officials. 
• Lower crude oil prices weigh on the commodity-linked Loonie. 

The USD/CAD pair trades with mild gains to around 1.3710 despite the stronger US Dollar (USD) during the early Asian session on Thursday. The rising bets of 25 basis points (bps) by the US Federal Reserve (Fed) in November might provide some support to the pair ahead of the key US Consumer Price Index (CPI) data on Thursday.

The Open Market Committee (FOMC) Minutes from the September meeting released on Wednesday indicated a "substantial majority" of policymakers supported the outsize cut, but also suggested there was robust debate over the decision. However, "some" participants favored only a quarter-point cut, while "a few others" mentioned they could have supported that decision as well. 

On Wednesday, Boston Fed President Susan Collins said that with inflation trends growing weaker, it is very probable that the Fed can deliver more interest rate reductions. Meanwhile, Boston Fed President Susan Collins noted, "I saw an initial 50-basis-point rate reduction as prudent in this context, recognizing that monetary policy remains in restrictive territory." 

Investors now see the Fed lowering interest rates by a quarter point in November instead of a jumbo rate cut, followed by a similar move in December. This, in turn, could lift the Greenback against the Canadian Dollar (CAD) in the near term. The markets have priced in nearly an 80% chance of 25 basis points (bps) Fed rate cuts in November, up from 31.1% last week, according to the CME FedWatch Tool.

On the Loonie front, the decline of crude oil prices could exert some selling pressure on the commodity-linked CAD as Canada is the largest oil exporter to the United States. On Friday, traders will take more cues from the Canadian job report for September, including the Unemployment Rate and Net Change in Employment. If the report shows a stronger-than-expected outcome, this could help limit the CAD's losses.