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• USD/CAD trades on a flat note near 1.3785 in Wednesday’s early Asian session. 
• Markets bet that the Fed will start cutting rates next month with a 50 bps reduction to its policy rate.
• The Canadian employment report on Friday will be closely watched. 

The USD/CAD pair trades flat around 1.3785 during the early Asian session on Wednesday. The US Dollar (USD) rebounds as some calm returns to the markets, which helps limit the pair’s losses. Later in the day, the Canadian July Ivey Purchasing Managers Index (PMI) and EIA US crude oil inventories report will be released. 

The markets rebound following the sharp sell-off earlier this week. Chicago Federal Reserve President Austan Goolsbee on Monday warned against taking too much of a signal from the market sell-off, adding that it was prompted by the Bank of Japan's (BoJ) rate decision last week and rising Middle East geopolitical tensions. However, traders expect the US Federal Reserve (Fed) to take some action before it misses the chance after a disappointing US employment report for July. 

Joseph LaVorgna, chief US economist at SMBC Nikko Securities, expects the Fed to cut interest rates by 3 full percentage points by the end of 2025, more aggressive than the current market outlook. Meanwhile, financial markets have priced in 69.5% odds of a 50 basis points Fed rate cut in September, down from 85% on Monday, according to the CME FedWatch tool. 

On the Loonie front, traders will closely monitor the Canadian employment data, which is due on Friday. The Canadian economy is expected to add 22.5K jobs in July, while the Unemployment Rate is projected to rise to 6.5% in the same report period from 6.4% in June. 

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