USD/CAD stays above 1.4350 due to lower Oil prices, hawkish policy shift by Fed

• USD/CAD could appreciate further due to the hawkish policy shift by the US Federal Reserve.
• The latest FOMC Meeting Minutes showed that Fed policymakers expressed concern about inflation and the impact of President-elect Trump's policies.
• The commodity-linked CAD struggles due to lower crude Oil prices.

USD/CAD edges lower after registering gains in the previous two sessions, trading around 1.4370 during the Asian hours on Thursday. However, the USD/CAD pair faced challenges as the US Dollar (USD) appreciated due to increased hawkish sentiment surrounding the Federal Reserve's (Fed) policy outlook in 2025.

The Federal Open Market Committee (FOMC) Minutes for the December policy meeting showed that Federal Reserve's (Fed) policymakers expressed concern about inflation and the impact that President-elect Donald Trump's policies could have.

Fed officials indicated they would be moving more slowly on rate reductions because of the uncertainty. Fed officials penciled the expected cuts in 2025 to two from four in the previous estimate at September's meeting.

The US Dollar Index (DXY), which measures the US Dollar's (USD) performance against six major currencies, holds its position near 109.00 as long-term US bond yields continue climbing on heavy supply. The 10-year stand at 4.66%, while the 30-year approached 4.90% at the time of writing.

Traders are evaluating the implications of Canadian Prime Minister (PM) Justin Trudeau's resignation after nine years in office, amid escalating tariff threats, political instability, and declining approval ratings, which could pave the way for snap elections. Trudeau announced on Monday that he would step down as the leader of Canada's ruling Liberal Party once a successor is chosen.

Additionally, the commodity-linked CAD faces challenges against the US Dollar due to weakening crude Oil prices, given that Canada is the largest Oil exporter to the United States (US). West Texas Intermediate (WTI) Oil price extends its losses for the second successive day, trading around $72.70 per barrel at the time of writing.

Traders analyze the latest weekly report from the US Energy Information Administration (EIA). The EIA report indicated a 0.959 million-barrel drop in US crude Oil stockpiles, marking the seventh consecutive decrease. The market expectations were a 0.250 million-barrel decline for the week ending January 3, against the previous decline of 1.178 million barrels.