USD/CAD flat lines near 1.4000 on hopes over US shutdown deal, Fed rate cut bets

• USD/CAD holds steady around 1.4010 in Wednesday's early European session. 
• The US government shutdown nears an end as a funding bill moves to the House after the Senate approved it.  
• The Bank of Canada cut the rates to 2.25% in its October meeting and signaled that the easing cycle may be over. 

The USD/CAD pair trades on a flat note near 1.4010 during the early European session on Wednesday. Private-sector US jobs data stoked worries about labour market weakness, which could weigh on the US Dollar (USD) against the Canadian Dollar (CAD) in the near term. The Bank of Canada (BoC) Summary of Deliberations will be published later on Wednesday. 

Private employers shed an average of 11,250 jobs per week on average in the four weeks ended October 25, the Automatic Data Processing (ADP) showed on Tuesday. The report suggested the labor market slowed in the second half of October, compared with earlier in the month. 

The US Senate approved a compromise on Monday that would end the longest government shutdown in US history. The funding bill is headed to the House for a final vote as soon as Wednesday. If it passes in both chambers of Congress, it will head to US President Donald Trump to be signed into law. 

Traders brace for an imminent US government reopening that is expected to unleash a backlog of economic releases. Nonetheless, analysts believe that resumption of economic data will point to a slowing economy and that would prompt the Federal Reserve (Fed) to cut the interest rates next month. This, in turn, could undermine the USD against the CAD. 

The BoC decided to cut its policy rate to 2.25% in the October meeting, marking the second consecutive 25 basis points (bps) reduction. BoC Governor Tiff Macklem signalled that further rate cuts are unlikely for now, citing that the economy follows its projected path.

The BoC survey of market participants suggested 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.