USD/CAD drifts lower to near 1.3950 as Fed rate cut bets grow

• USD/CAD softens around 1.3960 in Friday's early European session.
• Traders expect the Fed to cut interest rates two more times this year.
• Lower crude oil prices might weigh on the commodity-linked Loonie and cap the downside for the pair. 

The USD/CAD pair loses ground near 1.3960, snapping the three-day winning streak during the early European session on Friday. The uncertainty surrounding the US government shutdown weighs on the US Dollar (USD) against the Canadian Dollar (CAD). The US September Nonfarm Payrolls (NFP) report will not be released in light of the ongoing federal shutdown. 

The US government remains shut down after Congress failed to reach a funding deal. Republicans and Democrats are at odds over enhanced Obamacare subsidies, which drag the Greenback lower. The shutdown is likely to extend into next week. 

Additionally, the weaker ADP National Employment report boosts expectations that the Federal Reserve (Fed) will cut interest rates two more times this year, undermining the USD. US private sector payrolls declined 32,000 in September, following the 3,000 decrease (revised from a 54,000 increase) reported in August and came in below the market consensus of 50,000.

On the other hand, a fall in crude oil prices might exert some selling pressure on the commodity-linked Loonie and create a tailwind for the pair. Traders are concerned about oversupply in the market ahead of a meeting of the Organization of the Petroleum Exporting Countries and allies (OPEC+) over the weekend. 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.