USD/CAD stays above 1.3900 due to lower Oil prices

• USD/CAD holds ground as the commodity-linked CAD struggles amid declining Oil prices.
• WTI price falls as OPEC+ signaled a larger output increase for next month.
• The CME FedWatch Tool indicates the pricing in a 97% chance of a Fed rate cut in October.

USD/CAD moves sideways after registering gains in the previous session, hovering around 1.3920 at the time of writing during the European hours on Wednesday. The USD/CAD pair may appreciate as the commodity-linked Canadian Dollar (CAD) could face challenges amid declining Crude Oil prices. It is worth noting that Canada is the largest Oil exporter to the United States (US). Canada's S&P Global Manufacturing Purchasing Managers' Index (PMI) and BoC Summary of Deliberations will also be eyed later in the North American session.

West Texas Intermediate (WTI) extends its losing streak, trading around $61.80 per barrel at the time of writing. Oil prices fall as the Organization of the Petroleum Exporting Countries and its allies, including Russia, known as OPEC+, signaled a larger output increase for next month, while uncertainty over a potential US government shutdown raised concerns about economic activity and fuel demand.

However, the US Dollar (USD) faces challenges after the latest jobs figures from the United States (US), which boosted the likelihood of further Federal Reserve (Fed) rate cuts in 2025. The CME FedWatch Tool suggests that markets are now pricing in nearly a 97% chance of a Fed rate cut in October and a 76% possibility of another reduction in December. Traders are likely to await September's US ADP Employment Change and ISM Manufacturing PMI data later in the day, though their release could be disrupted by the government shutdown.

The US government has entered a shutdown, leaving about 750,000 federal employees furloughed after Congress failed to pass funding bills. The Labor Department warned Monday that its statistics agency would halt data releases--including Friday's key monthly jobs report--if the partial shutdown continues.