Insights 
VT 
USD/CAD shows slight growth, trading around 1.4030 during the Asian session on Friday. The Greenback’s potential may be restricted due to traders expecting further monetary easing by the US Federal Reserve (Fed) next month.
Comments from Fed officials have raised expectations for a December rate reduction. San Francisco Fed President mentioned supporting an interest rate cut, referencing labour market concerns. Another official noted the employment market’s weakness could justify a further rate cut, hinging on upcoming data affected by the US government shutdown.
Fed Rate Expectations and Impact on USD
US Fed funds futures indicate an 87% probability of a 25 bps rate cut at December’s Fed meeting, up from 39% a week prior, according to the CME FedWatch tool. In contrast, lower crude oil prices due to hopes of a ceasefire between Ukraine and Russia might impact the CAD negatively, benefiting the currency pair.
Oil is Canada’s largest export, thus lower prices usually decrease CAD value. Canadian Dollar’s value is influenced by interest rates set by the Bank of Canada, oil prices, economic health, inflation, and Trade Balance. Higher interest rates generally support the CAD, while oil price movements immediately affect its value. Economic data releases also impact CAD, with strong data being positive and weak data leading to a fall.
Given the current situation on November 28, 2025, we are seeing conflicting pressures on the USD/CAD pair around the 1.4030 mark. The high probability of a Federal Reserve rate cut in December is creating a ceiling for the US dollar, as markets are now pricing in an 87% chance of such a move. This sentiment has been reinforced by recent US inflation data for October 2025, which came in softer than expected at 2.8%, and a non-farm payrolls report that showed job growth slowing to just 95,000.
However, a significant headwind is building for the Canadian dollar due to falling energy prices. WTI crude oil has recently broken below the key psychological level of $75 per barrel, trading near $72.50 on renewed optimism for a ceasefire in Eastern Europe. As Canada is a major oil exporter, this sustained price weakness directly undermines the value of the loonie and provides underlying support for USD/CAD.
Upcoming Canadian GDP Data and Market Implications
All eyes are now on the Canadian Q3 GDP data due later today, which will be a critical catalyst for the coming weeks. Market consensus is for a weak reading of only 0.2% annualized growth, and a number at or below this forecast would likely pressure the Bank of Canada to adopt a more dovish stance. This could cause the interest rate differential to favor the US dollar, even with a Fed cut, pushing the pair higher.
For derivative traders, this environment suggests an increase in volatility, making options strategies attractive. A weak Canadian GDP print could be a trigger to buy call options on USD/CAD, betting on a move towards the 1.4150 level last seen in early 2024. Conversely, if the GDP data surprises to the upside, buying put options would be a way to trade a potential sharp drop back towards 1.3900 as the focus shifts back to Fed easing.
