• USD/CAD trades in negative territory for the fourth consecutive day near 1.3620 in Wednesday’s Asian session. 
• Markets are already expecting a 25 bps rate cut in September, with some anticipating a larger 50 bps cut.
• Canada’s annual CPI inflation rate fell to 2.5% in July, supporting a third straight BoC rate cut. 

The USD/CAD pair trades with a bearish bias around 1.3620, the lowest level since July 12, during the early European session on Wednesday. The expectation that the US Federal Reserve (Fed) would start its easing cycle in September continues to weigh on the US Dollar (USD). Investors will monitor the FOMC Minutes on Wednesday for more cues about the Fed’s interest rate plans in the future. 

The weakness of the Greenback has been fuelled by Fed rate cut expectations ahead of the key events and dovish comments from Fed officials. Chicago Fed President Austan Goolsbee said earlier this week that the US economy does not show signs of overheating, therefore, Fed officials should be vigilant about keeping the restrictive policy in place longer than necessary. Additionally, Minneapolis Fed President Neel Kashkari said on Monday that it was appropriate to discuss a potential US interest rate cut in September due to concerns about the weakening labor market.

Investors are now pricing in around 67.5% possibility of a 25 basis points (bps) Fed rate cut in its September meeting, while the chance of a 50 basis points rate cut fell to 32.5% from 53.0% a week earlier.