USD/CAD sees more downside below 1.3750 as traders assess Fed’s outlook for 2026

US Dollar Price Last 7 Days

The table below shows the percentage change of US Dollar (USD) against listed major currencies last 7 days. US Dollar was the weakest against the Swiss Franc.

	USD	EUR	GBP	JPY	CAD	AUD	NZD	CHF
USD		-0.74%	-0.24%	-0.11%	-0.47%	-0.12%	-0.14%	-0.98%
EUR	0.74%		0.54%	0.69%	0.32%	0.68%	0.65%	-0.20%
GBP	0.24%	-0.54%		0.17%	-0.22%	0.14%	0.11%	-0.73%
JPY	0.11%	-0.69%	-0.17%		-0.36%	0.00%	-0.02%	-0.85%
CAD	0.47%	-0.32%	0.22%	0.36%		0.36%	0.34%	-0.53%
AUD	0.12%	-0.68%	-0.14%	-0.00%	-0.36%		-0.03%	-0.87%
NZD	0.14%	-0.65%	-0.11%	0.02%	-0.34%	0.03%		-0.84%
CHF	0.98%	0.20%	0.73%	0.85%	0.53%	0.87%	0.84%

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).

According to the CME FedWatch tool, there is a 64.3% chance that the Fed will cut interest rates at least two times by the end of 2026. While the Fed’s dot plot showed that policymakers see the Federal Fund Rate falling to 3.4% by 2026, indicating one more interest rate cut from current levels of 3.50%-3.75%.

Fed dovish expectations are prompted by weak United States (US) labour market conditions, and the continuous endorsement for more interest rate cuts by President Donald Trump. Last week, White House spokeswoman Karoline Leavitt stated that the President was pleased to see the 25-basis-point (bps) interest rate reduction, but he thinks more should be done.

For fresh cues on the current state of the US employment, investors await the Nonfarm Payrolls (NFP) data for November, which will be released on Tuesday.

Meanwhile, the Canadian Dollar (CAD) trades firmly against its peers from the past few trading days on expectations that the Bank of Canada (BoC) is done with reducing interest rates in the near term. In the monetary policy statement last week, the BoC reiterated that the “current rate is at about the right level to keep inflation close to 2%” as long as the “economy and inflation evolve in line with projections”.

In Monday’s session, the Canadian Dollar will be influenced by the Consumer Price Index (CPI) data for November, which will be published at 13:30 GMT. The headline CPI is expected to grow at a faster pace of 2.4% year-on-year against 2.2% in October.

Economic Indicator

Consumer Price Index (YoY)

The Consumer Price Index (CPI), released by Statistics Canada on a monthly basis, represents changes in prices for Canadian consumers by comparing the cost of a fixed basket of goods and services. The YoY reading compares prices in the reference month to the same month a year earlier. Generally, a high reading is seen as bullish for the Canadian Dollar (CAD), while a low reading is seen as bearish.