USD/CAD reaches fresh six-month highs near 1.4050 ahead of Fed Powell's speech

• USD/CAD marked a new six-month high of 1.4043 on Tuesday.
• The US Dollar may struggle due to rising odds of further Fed rate cuts.
• The upbeat Canadian employment data have diminished expectations for another BoC rate cut in October.

USD/CAD gains ground for the second successive day, trading around a new six-month high of 1.4043 during the Asian hours on Tuesday. Traders will likely observe the US Federal Reserve (Fed) Chair Jerome Powell, who is scheduled to speak on Economic Outlook and Monetary Policy at the National Association for Business Economics (NABE) Annual Meeting in Philadelphia later in the day.

The upside of the USD/CAD pair could be restrained as the US Dollar (USD) could face challenges amid rising odds of further rate cuts by the Fed by year-end. The CME FedWatch Tool suggests that markets are now pricing in nearly a 97% chance of a Fed rate cut in October and a 92% possibility of another reduction in December.

Philadelphia Fed President Anna Paulson said on Monday that rising risks to the job market argue for more interest rate cuts by the US central bank, as trade tariffs now appear unlikely to push up inflation as much as expected.

Market anxiety deepened amid the ongoing US government shutdown, as the White House moved forward with widespread federal layoffs. The shutdown is expected to weigh on the US economy, with missed paychecks and the suspension of billions of dollars' worth of government services likely to ripple beyond federal employees and impact the broader public.

The USD/CAD pair may lose ground as the Canadian Dollar (CAD) could receive support as the upbeat Canadian employment data reduced bets on another Bank of Canada (BoC) interest rate cut this month. Investors see roughly 50% odds the Canadian central bank cuts interest rates at its next policy decision on October 29, down from 72% chance before the data.