USD/CAD moves above 1.3800 as traders expect BoC to deliver a 50 bps rate cut

• USD/CAD receives support as BoC is widely expected to reduce interest rates by 50 basis points on Wednesday.
• The commodity-linked CAD faced challenges due to lower crude Oil prices.
• The US Dollar gains ground as the economy's resilience has increased the odds of nominal rate cuts by the Fed.

USD/CAD continues to gain ground as the Canadian Dollar (CAD) receives downward pressure ahead of the Bank of Canada (BoC) interest rate decision scheduled for Wednesday. The USD/CAD pair moves above 1.3800 during Monday's Asian trading hours.

Decreasing price pressures, combined with a notable decline in labor growth and household spending, have fueled expectations that the Bank of Canada (BoC) will implement a significant interest rate cut of 50 basis points (bps) at its upcoming monetary policy meeting.

Additionally, lower Oil prices have put pressure on the commodity-linked Loonie Dollar as Canada is the largest Oil exporter to the United States (US). Last week, crude Oil prices depreciated by more than 7%, partly due to slowing economic growth in China and easing Middle-East tensions. West Texas Intermediate (WTI) Oil price trades around $69.00 per barrel at the time of writing.

US Dollar (USD) receives support due to fading odds of further aggressive rate cuts by the US Federal Reserve (Fed) in 2024. Last week's data showed the US economy's resilience, which has strengthened the likelihood of a nominal rate cut by the Federal Reserve (Fed) in November.

According to the CME FedWatch Tool, the probability of a 25-basis-point rate cut in November has risen to 99.3%, up from 89.5% a week earlier.

The monthly US Retail Sales rose by 0.4% in September, surpassing the 0.1% increase recorded in August and the expected gain of 0.3%. Additionally, US Initial Jobless Claims fell by 19,000 during the week ending October 11, the largest decline in three months. The total number of claims dropped to 241,000, significantly below the anticipated 260,000.