• USD/CAD holds firm as the US Dollar resists downside despite mounting expectations for a December rate cut.
• CME FedWatch now shows 78% odds of a 25-bps cut in December, up sharply from around 30% last week.
• Traders now turn to the delayed US PPI and Retail Sales data due on Tuesday.

The Canadian Dollar (CAD) trades on the back foot against the US Dollar (USD) on Monday, as the Greenback holds firm despite rising Federal Reserve (Fed) rate-cut expectations. At the time of writing, USD/CAD is trading around 1.4112, hovering near more than two-week highs following last week’s advance.

December rate-cut expectations continue to build after a fresh round of dovish remarks from Fed officials. Fed Governor Christopher Waller told Fox Business on Monday that his primary concern is the softening labour market, noting that inflation is “not a big problem” given recent weakness in employment. He added that the September payrolls figure is likely to be revised lower and that concentrated hiring was “not a good sign,” signalling that he is advocating a rate cut in the near term.

Last week, New York Fed President John Williams echoed a similar stance, saying the current policy setting remains “modestly restrictive” and that there is still room for another adjustment to guide rates closer to neutral. His comments reignited rate-cut bets after a period of fading conviction, pushing markets to reprice expectations more aggressively.

According to the CME FedWatch Tool, markets are pricing a 78% probability of a 25 basis point (bps) rate cut in December, sharply higher from levels as low as 30% last week.

However, uncertainty persists as several other Fed officials maintain a more cautious tone, warning that inflation progress remains uneven and that it may be premature to ease again in December. On top of that, the lack of incoming data has amplified the ambiguity.

The Bureau of Labor Statistics confirmed last week that the October Consumer Price Index (CPI) was cancelled, while the October Employment Situation Report will now be released together with November’s figures in mid-December. November CPI has also been pushed into the same window. All of these releases fall after the December 9-10 FOMC meeting, leaving the Fed with little updated information on inflation or labour conditions heading into the policy decision.

Looking ahead, traders will closely watch the delayed US Producer Price Index (PPI) data for September alongside the Retail Sales figures due on Tuesday. On the Canadian side, the economic calendar remains light until Friday, when September Gross Domestic Product (GDP) and the Q3 GDP print are scheduled for release.