Fed Hints at More Cuts, Dollar Weakens; CAD 1.40Q1

Two clear, data‑driven FX developments dominated the last 24 hours: a Federal Reserve official publicly backing further easing this year, and the Canadian dollar slipping through the key C$1.40 per USD threshold. Both moves are straightforward in their causes and implications—one shifts broad USD rate expectations, the other tightens focus on near‑term Canadian data and commodity flows.

Fed official backs additional cuts — dollar under pressure

New York Fed President John Williams said he supports additional interest‑rate reductions this year, citing growing downside risks in the labour market. That comment, coming from a senior Fed policymaker, lowered the market’s expected path for U.S. policy rates and contributed to a softer dollar across major and emerging currencies.

Why this matters for currencies

U.S. monetary policy is the primary benchmark for global rates and FX pricing. When a high‑profile Fed official signals more easing, futures and swap rates repriced toward lower terminal rates, reducing yield advantages for dollar‑denominated assets. The immediate FX reaction is typically a weaker USD versus other majors (EUR, JPY, GBP) and many EM currencies, all else equal.

What traders should watch next

• FOMC calendar and communications: upcoming policy meeting and minutes that will clarify committee thinking.
• U.S. macro surprises (inflation, payrolls): data that could push markets to re‑price the timing or size of cuts.

Canadian dollar weakens after breaking C$1.40 per USD

The Canadian dollar slipped through the C$1.40 level against the U.S. dollar, a noteworthy technical and psychological threshold. The move came alongside broad dollar support driven by the Fed commentary and a pullback in crude prices that removes a natural tailwind for the loonie.

Key drivers for the loonie

Two clear drivers explain the loonie’s move: 1) safer‑haven demand for the USD following shifts in U.S. rate expectations, and 2) weaker oil prices that reduce Canada’s terms‑of‑trade support. The break of 1.40 increases sensitivity to the upcoming Canadian jobs report—strong employment numbers would likely trigger a fast retracement, while a soft print could push CAD weaker.

Immediate levels and event risk

• Technical level: C$1.40 is now a nearby resistance turned pivot for USD/CAD.
• Events: Canada’s next employment release and weekly oil inventories will be the main near‑term catalysts.

Bottom line: a senior Fed official’s public support for more easing has pressured the dollar broadly, while the loonie’s break of C$1.40 reflects both that USD softness and commodity sensitivity. Traders should watch central‑bank communications and the imminent Canadian jobs and oil data for the next directional cues.