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• USD/CAD weakens near 1.3805 in Thursday’s early Asian session. 
• The Fed kept its key interest rate at 5.25% to 5.5% at its July meeting on Wednesday. 
• Higher crude oil prices amid Middle East geopolitical risks support the commodity-linked Loonie. 

The USD/CAD pair trades on a softer note near 1.3805 during the early Asian session on Thursday. The further downside of the US Dollar (USD) after the Federal Reserve (Fed) decided to hold rates unchanged, drags the pair to the weekly lows. Investors will take more cues from the US ISM Manufacturing PMI, weekly Initial Jobless Claims, and the final S&P Global Manufacturing PMI, which are due later on Thursday. 

As widely expected by market players, the US Fed left the policy rate, federal funds rate, unchanged at the range of 5.25%-5.50% at its July meeting on Wednesday. Fed Chair Jerome Powell said during the press conference that a rate cut in September is “on the table. Powell added that the central bank will closely monitor the labor market and stay vigilant for signs of a potentially sharp downturn. 

Dovish comments from the Fed and rising expectations for rate cuts in September exert some selling pressure on the Greenback. According to the CME FedWatch tool, traders are now pricing in a 100% chance that the central bank will cut interest rates by 25 basis points (bps) in its September meeting.

On the Loonie front, the recovery of crude oil prices amid escalating geopolitical tensions in the Middle East and a decline in weekly US crude oil inventories help limit the Canadian Dollar’s (CAD) losses. It's worth noting that higher oil prices generally support the CAD lower as Canada is the leading exporter of Oil to the United States (US).

On the other hand, the rising bets that the Bank of Canada (BoC) will continue to ease policy after its latest interest rate cut last week might cap the CAD’s upside. Traders expect one more 25 bps rate cut this year, with nearly 60% odds that the BoC will cut rates again in its September meeting. 

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