USD/CAD holds below 1.3800 as weaker US job data fuels Fed rate cut expectations

• USD/CAD drifts lower to near 1.3780 in Monday's early European session.
• Soft US job data fuels Fed rate cut bets, undermining the US Dollar. 
• Lower crude oil prices might drag the commodity-linked Loonie lower and cap the downside for the pair. 

The USD/CAD pair trades on a softer note around 1.3780 during the early European trading hours on Monday. The Greenback edges lower against the Canadian Dollar (CAD) due to the weaker-than-expected US July job data. Investors will take more cues from the US ISM Services Purchasing Managers Index (PMI), which is due later on Tuesday. 

The US Nonfarm Payrolls (NFP) rose by 73,000 in July, versus a 14,000 increase (revised from 147,000) prior, according to the US Bureau of Labor Statistics (BLS) on Friday. This reading came in worse than the estimations of 110,000. Meanwhile, the US Unemployment Rate climbed to 4.2% in July from 4.1% in June, as expected. The US ISM Manufacturing PMI also came in weaker than projected, dropping to 48.0 in July from 49.0 in June. 

Fed funds futures traders ramped up bets on rate cuts again on Friday after the downbeat US economic data, which created a headwind for the US Dollar (USD). Markets are now pricing in a nearly 95% possibility that the US Federal Reserve (Fed) will ease rates in September after the weaker-than-expected jobs data, with over 63 basis points (bps) worth of reductions expected by December.

On the other hand, crude oil prices slumped after the Organization of Petroleum Exporting Countries and allies (OPEC+) announced plans to boost oil production by 547K barrels per day (bps) for September as concerns mount over potential supply disruptions linked to Russia. This, in turn, could weigh on the commodity-linked Loonie. It's worth noting that Canada is the largest oil exporter to the US, and lower crude oil prices tend to have a negative impact on the CAD value.