USD/CAD shows slight growth, trading around 1.4030 during the Asian session on Friday. The Greenback may face some limitations as traders anticipate more monetary easing from the US Federal Reserve (Fed) next month. Comments from Fed officials have increased expectations for a rate cut in December. The San Francisco Fed President expressed support for lowering rates, citing concerns about the labor market. Another official mentioned the weakness in the employment market might justify another cut, depending on upcoming data affected by the US government shutdown.

Fed Rate Expectations and Impact on USD

According to the CME FedWatch tool, US Fed funds futures show an 87% chance of a 25 basis points rate cut at December’s Fed meeting, a rise from 39% just a week before. On the other hand, falling crude oil prices, fueled by hopes for a ceasefire between Ukraine and Russia, may hurt the CAD, which can favor the USD/CAD pair. As Canada’s largest export, lower oil prices usually weaken the CAD. The Canadian Dollar’s value is affected by several factors including interest rates set by the Bank of Canada, oil prices, economic health, inflation, and Trade Balance. Typically, higher interest rates strengthen the CAD, while oil price changes quickly impact its value. Strong economic data supports the CAD, while weak data tends to drive it lower. As of November 28, 2025, we see conflicting pressures on the USD/CAD pair around 1.4030. The high likelihood of a Federal Reserve rate cut in December is creating a ceiling for the US dollar, with markets pricing in an 87% chance of this move. This sentiment is backed by recent US inflation data from October 2025, which showed a softer-than-expected rate of 2.8%, along with a non-farm payrolls report revealing job growth slowing to just 95,000. However, the Canadian dollar is facing a significant challenge due to falling energy prices. WTI crude oil has dipped below the crucial psychological level of $75 per barrel, trading close to $72.50 due to renewed optimism for a ceasefire in Eastern Europe. As Canada is a major oil exporter, low oil prices directly weaken the loonie and provide support for USD/CAD.

Upcoming Canadian GDP Data and Market Implications

The focus now shifts to the Canadian Q3 GDP data that will be released later today, which could be a vital catalyst for the upcoming weeks. The market expects weak growth of only 0.2% annualized. If the actual number is at or below this forecast, it could pressure the Bank of Canada towards a more dovish stance. This shift might favor the US dollar, even with a Fed cut, pushing the pair higher. For derivative traders, this situation suggests an increase in volatility, making options strategies appealing. A weak Canadian GDP figure could trigger buying call options on USD/CAD, betting on a rise towards the 1.4150 level seen earlier in 2024. Conversely, if the GDP data surprises positively, buying put options could be a way to capitalize on a potential quick drop back to 1.3900 as attention shifts back to Fed easing. Create your live VT Markets account and start trading now.

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