• The US Dollar dips below 1.4000 against the CAD on risk-on markets.
• The reopening of the US government has boosted risk appetite.
• The BoC has adopted a more cautious tone towards monetary policy.

 The US Dollar is extending its reversal against its Canadian counterpart for the sixth consecutive day on Thursday. The end of the US government shutdown has triggered a moderate enthusiasm that is weighing the US Dollar across the board, and pushing the USD/CAD to 10-day lows below the 1.4000 line.

Markets are celebrating that US President Trump finally signed the bill that will allow for the reopening of the federal government, and the release of a backlog of delayed macroeconomic figures. The data on the releases, however, remains unclear, and the White House stated that some figures, such as October’s jobs and consumer inflation data, may never be published.

Fed speakers continued showing their wide divergences on monetary policy on Wednesday, but investors have dialled down hopes of a Fed rate cut in December. Futures markets are pricing a 54% chance of a quarter-point cut, down from 67% last week and above 90% one month ago.

Fed Governor Stephen Miran reiterated the need to ease monetary policy further to avoid further labour market deterioration. Atlanta Fed President Raphael Bostic, on the contrary, showed further concern about the upside risks of inflation and warned against cutting rates too fast.

In Canada, the upbeat employment data released last week and the Bank of Canada’s more cautious tone towards monetary policy have forced investors to reassess their bets of further BoC easing in the near term. This is contributing to strengthening the Loonie.