The USD/CAD pair held steady around 1.3900 during Tuesday’s Asian session as traders remained cautious amid the heightened uncertainty surrounding the outcome of the US presidential election. The US Dollar (USD) faced downward pressure following a disappointing Nonfarm Payrolls report for October, which revealed a mere 12,000 job increase, a sharp decline from the previous month’s gain of 223,000.
Current opinion polls indicate that former President Donald Trump and Vice President Kamala Harris are nearly tied, with the final outcome likely remaining unknown for several days following Tuesday’s vote. Both candidates expressed confidence in their prospects while campaigning across Pennsylvania on the final day of a tightly contested election. Trump has also signaled he may contest any unfavorable results, reminiscent of his actions in 2020.
Traders are now closely awaiting the US Federal Reserve’s (Fed) policy decision, scheduled for Thursday, with markets anticipating a modest 25 basis point rate cut. The CME FedWatch Tool indicates a 99.5% probability of this quarter-point reduction occurring in November.
While the USD/CAD pair may face downward pressure, any declines could be mitigated as the commodity-linked Canadian Dollar (CAD) encounters challenges from a cooling West Texas Intermediate (WTI) oil price. WTI had seen a more than 3% increase on Monday after the OPEC+ coalition announced a delay in its December production hike, trading around $71.20 per barrel at the time of writing.
Moreover, the Canadian Dollar may weaken in anticipation of further rate cuts by the Bank of Canada (BoC) at its final monetary policy meeting of the year in December. BoC Governor Tiff Macklem has indicated that the central bank is prepared to implement another 50 basis point reduction if deemed necessary. Last week, he told a Senate committee, “We’ve demonstrated we’re prepared to do a 50-basis-points cut if we think that’s appropriate. And if we think it’s appropriate to do it again, we’ll do it again.”
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