USD/CAD remains depressed below 1.3800 amid higher hopes of Fed cuts

• The Dollar attempts to pick up against the CAD, but remains below 1.3800, near two-week lows.
• Higher hopes of Fed cuts are keeping US Dollar's upside attempts limited.
• FX volatility remains subdued, ahead of the US PCE Prices Index and Canada's GDP data, due on Friday.

The US Dollar has ticked up from two-week lows below 1.3770 against the Canadian Dollar on Thursday, but remains capped below the 1.3800 level, after depreciating 0.5% over the two previous days, wth investors ramping up bets for Fed cuts.

New York Fed President John Williams further fueled these hopes, affirming that the Fed's policy is still at restrictive levels and stating that every meeting is "live" for him. Hopes of a Fed cut in September have increased to 87%, up from 75% last week.

The Greenback is also suffering from the escalation of Trump's attacks on the Fed. His attempt to fire Governor Cook has been seen as a move to shift the committee's consensus to the dovish side, which, on the one hand, boosts hopes of a faster easing cycle and, on the other, erodes investors' confidence in the central bank, with negative consequences for the US Dollar in any case.

In the absence of relevant macroeconomic releases, a mild pickup in Oil prices is providing some support to the CAD, as crude is Canada's main export. Currency volatility, however, remains subdued on Thursday, with investors awaiting the US PCE Prices Index figures and Canada's Gross Domestic Product figures.

The Canadian Economy is expected to have contracted at a 0.6% annualised rate in the second quarter, following a 2.2% advance in the first three months of the year. These figures would add pressure on the BoC to ease its monetary policy further, and might provide some support to the US Dollar.