Canadian Dollar remains subdued near two-month lows as falling oil prices weigh

USD/CAD continues its winning streak for the eighth consecutive day, trading around 1.4200 during Asian hours on Wednesday. The currency pair remains positioned near two-month highs as the commodity-linked Canadian Dollar (CAD) faces headwinds from falling crude oil prices.

Energy markets eased as Middle Eastern crude exports recovered toward pre-war levels, reaching 17.5 million barrels per day, about 98% of baseline output. Supply streams received a boost as Saudi Arabia partially restarted its East-West pipeline at roughly half capacity, while covert tanker traffic through the Strait of Hormuz remained active.

Downwards pressure on oil prices intensified following supply relief measures and inventory gains in the United States (US). The US government announced plans to release up to 40 million barrels from the Strategic Petroleum Reserve (SPR) to curb domestic fuel costs. Reinforcing the bearish tone for crude, fresh industry data revealed a 1-million-barrel build in US crude inventories over the past week.

Canada growth cools as third-quarter rebound loses steam

Economists at NBC argue that “this morning’s GDP report confirms that the Canadian economy’s rebound lost some momentum in the third quarter,” underscoring a softer tone after several months of solid gains. Even so, they highlight that Statistics Canada’s preliminary estimate still “points to a 0.2% increase in GDP in August,” suggesting that activity continues to expand, albeit at a more moderate pace.

Meanwhile, the US Dollar gained ground as market expectations of further Federal Reserve rate hikes strengthened. According to the CME FedWatch Tool, traders are now pricing in nearly a 68% chance of a rate hike in October and a 95% likelihood of a quarter-point increase in December. Market focus now shifts to Friday's US Nonfarm Payrolls report, where economists project 90,000 jobs added in September, with the Unemployment Rate steady at 4.1%.