USD/CAD holds firm above 1.3850 as traders pile into BoC rate cut bets

• USD/CAD strengthens near 1.3860 in Thursday's early Asian session.
• Traders piled into bets that the BoC is set to cut rates soon.
• US PPI fell 0.1% MoM in August, softer than expected. 

The USD/CAD pair gains ground for a second consecutive day around 1.3860 during the early Asian session on Thursday. The Canadian Dollar (CAD) weakens against the US Dollar (USD) amid expectations that the Bank of Canada (BoC) would resume its easing cycle this month. The US Consumer Price Index (CPI) for August will take center stage later on Thursday. 

Investors see a nearly 90% odds that the BoC will lower interest rates next Wednesday, as recent employment data and ongoing tariff uncertainty have strengthened the case for a rate cut. Canadian job data showed that US tariffs pressured slow hiring momentum and tightened activity across key sectors. The Unemployment Rate in Canada ticked up to 7.1% in August from 6.9% in July, above the expectation of 7.0%. The Canadian central bank has held its benchmark rate at 2.75% since March. 

On the other hand, the softer-than-estimated US Producer Price Index (PPI) could drag the Greenback lower. Data released by the US Bureau of Labor Statistics (BLS) on Wednesday showed that the US PPI inflation declined to 2.6% on a yearly basis in August from 3.3% in July. This figure came in below the market consensus of 3.3%. On a monthly basis, the PPI declined by 0.1% in August, compared to the 0.7% increase (revised from 0.9%) prior. 

The lack of strong producer price pressures indicated softening domestic demand against the backdrop of a struggling labor market. This report reinforced the case for interest rates from the Federal Reserve (Fed) at its policy meeting next Wednesday.