Canadian Dollar Strengthens as Fed Rate Hike Bets Cool Down

The Canadian dollar strengthened against its U.S. counterpart on Tuesday as market expectations for further Federal Reserve rate hikes dwindled.

This shift in Fed policy bets reduced the yield advantage of the U.S. dollar, providing some support for the loonie.

According to the CME FedWatch Tool, the probability of a rate hike at the next Federal Open Market Committee meeting has fallen to around 20%, down from nearly 35% a month ago.

The upcoming release of the U.S. Consumer Price Index (CPI) report will be crucial in determining whether the Fed can hold rates steady or if further action is needed.