USD/CAD gains near 1.4000 as Oil prices drop, Fed rate cut bets ease

• USD/CAD gains ground as the commodity-linked Canadian Dollar struggles due to weaker Oil prices.
• WTI price edges lower as the API Weekly Crude Oil Stock rose by 4.4 million barrels last week.
• The CME FedWatch Tool indicates a 49% odds for a 25-basis-point Fed rate cut in December.

USD/CAD rebounds after registering 0.5% losses in the previous session, trading around 1.4000 during the Asian hours on Wednesday. The pair appreciates as the commodity-linked Canadian Dollar (CAD) comes under downward pressure amid lower crude Oil prices. West Texas Intermediate (WTI) Oil price halts its four-day winning streak, slipping to near $60.40 per barrel at the time of writing.

Crude Oil prices weakened following another inventory build in the United States (US). The latest American Petroleum Institute (API) report showed US crude stocks rising by 4.4 million barrels last week, the third straight weekly increase and the largest in over five months. The data, along with the IEA's projection of a record surplus in the coming year, reinforced worries that global supply may outstrip demand.

However, the Canadian Dollar (CAD) could receive support from the cautious sentiment surrounding the Bank of Canada (BoC) policy outlook. Canada's core measures monitored by the BoC stayed close to the 3% mark in October. Moreover, firm labour data, unemployment at 6.9% and wage growth around 4%, underlying price pressures remain elevated, reinforcing the central bank's cautious stance. Markets widely expect the BoC to keep interest rates unchanged through the end of 2026.

The USD/CAD pair also draws support as the US Dollar (USD) gains amid declining US Federal Reserve (Fed) rate cut bets for December. The CME FedWatch Tool suggests that financial markets are now pricing in a 49% chance that the Fed will cut its benchmark overnight borrowing rate by 25 basis points (bps) at its December meeting, down from 67% probability that markets priced a week ago.