USD/CAD holds gains above 1.3800 amid lower Oil prices

USD/CAD extends its gains for the fourth successive session, trading around 1.3810 during the Asian hours on Wednesday. The pair appreciates as the commodity-linked Canadian Dollar (CAD) struggles amid lower Oil prices. It is important to note that Canada is largest crude exporter to the United States (US).

West Texas Intermediate (WTI) Oil price loses ground for the second consecutive day, trading around $56.30 per barrel at the time of writing. Crude oil prices declined after US President Donald Trump said Venezuela would hand over 30–50 million barrels of crude to the United States. Markets worry that sustained Venezuelan flows could add supply to an already oversupplied market, while traders continue to assess the impact on future exports and the energy sector.

The upside of the USD/CAD pair could be restrained as the US Dollar (USD) edges lower after registering modest gains in the previous session. Traders await US economic data that could shape expectations for Federal Reserve (Fed) policy. ISM Services Purchasing Managers’ Index (PMI) and JOLTs job openings will be eyed later in the day.

Fed Governor Stephen Miran said on Tuesday that the US central bank should cut interest rates aggressively this year to sustain economic momentum. Meanwhile, Minneapolis Fed President Neel Kashkari, a voter on the Fed's rate-setting committee, cautioned that the unemployment rate could “pop” higher.

Richmond Fed President Tom Barkin, a non-voter on the Fed’s rate-setting committee this year, said Tuesday that interest rate adjustments will need to be “finely tuned” to incoming data, citing risks to both the Fed’s employment and inflation objectives, according to Reuters.

According to the CME Group's FedWatch tool, Fed funds futures continue to price in about an 82.8% probability that the US central bank will keep rates unchanged at its January 27–28 meeting.