USD/CAD rebounds toward 1.4050 as US shutdown resolution nears

• USD/CAD advances as the US Dollar strengthens on optimism that the US government shutdown will soon end.
• US President Donald Trump endorsed a bipartisan deal to end the US government shutdown.
• The CAD may receive support from caution surrounding the BoC policy outlook.

USD/CAD gains ground after two days of losses, trading around 1.4030 during the Asian hours on Tuesday. The pair rises as the US Dollar (USD) gains support amid progress in the US Senate toward passing a deal to reopen the government.

US President Donald Trump, on Monday, backed a bipartisan deal to end the US government shutdown, signaling a likely reopening within days. Senate Majority Leader John Thune said he expects Trump to sign the bill once Congress passes it. The US Senate advanced a government funding bill to end the shutdown, moving it closer toward passage by voting 60-40 in the first approval on extending the enhanced Affordable Care Act subsidies.

On US monetary policy, Federal Reserve (Fed) Governor Stephen Miran told CNBC on Monday that inflation is easing and reaffirmed that staying on course with rate cuts is appropriate, suggesting a 50-basis-pointbps reduction in December, or at least 25 bps. Meanwhile, St. Louis Fed President Alberto Musalem noted that inflation remains closer to 3% than the 2% target, adding that policymakers now have sufficient information to guide their decisions.

However, the Canadian Dollar (CAD) may regain its ground against its peers as upbeat domestic labor market data have bolstered expectations that the Bank of Canada (BoC) may pause its easing cycle. Canada's Unemployment Rate fell to 6.9% in October, from 7.1% prior, coming in below expectations. The Net Change in Employment increased by 66.6K individuals, against 60.4K prior, while the Participation Rate improved to 65.3%.