USD/CAD strengthens above 1.4000 as US advances shutdown deal

• USD/CAD gains traction to around 1.4035 in Tuesday's early European session.
• The US Senate passed a funding bill that could end the shutdown within days, supporting the US Dollar. 
• Canada's job market posted a surprise expansion in October, reinforcing BoC's rate hold. 

The USD/CAD pair gathers strength to near 1.4035 during the early European session on Tuesday. Hopes of an end to the longest government shutdown in history provide some support to the US Dollar (USD) against the Canadian Dollar (CAD). Traders await the US ADP Employment Change weekly report, which is due later on Tuesday.

The US Senate has passed amended funding legislation that moves the country's government one step closer to ending its federal shutdown. The bill will head to the House of Representatives for final approval. If it passes in both chambers of Congress, it will head to US President Donald Trump to be signed into law. Trump late Monday voiced support for a bipartisan agreement to end the US shutdown. 

On the other hand, the upbeat Canadian employment data might cap the downside for the Loonie. Statistics Canada reported on Friday that the Unemployment Rate ticked down to 6.9% in October from 7.1% in the previous month, better than the 7.1% expected. Additionally, the Canadian economy added 66,600 jobs in October, marking a second consecutive month of surprise employment gains.

"This report will make the Bank of Canada more comfortable to sit on the sidelines and let the 275 basis points of rate cuts in this cycle work their way through the economy," Leslie Preston, managing director and senior economist at Toronto-Dominion Bank, said in a report to investors.

The Bank of Canada (BoC) survey of market participants showed that many expect the rate to hold at 2.25% until at least mid-2027. However, other economists are divided, with some anticipating another reduction early in 2026, depending on how trade issues evolve.