• USD/CAD trades with mild gains around 1.3755 in Thursday’s early Asian session. 
• The expectation of a slower pace of Fed rate cuts underpins the USD broadly.
• The BoC is expected to cut rates by 50 bps next week. 

The USD/CAD pair posts modest gains to near 1.3755 during the early Asian session on Thursday. The US Dollar Index (DXY) rose further to multi-week tops above 103.50 amid rising bets that the US Federal Reserve (Fed) will proceed with modest interest rate cuts over the next year. Later on Thursday, the US Retail Sales will take centre stage. 

The Greenback edges higher as traders see the Fed gradually lowering interest rates in the remainder of the year. Traders have priced in a nearly 94% chance of a 25 basis points (bps) Fed rate cut in November, according to the CME FedWatch tool. 

Minneapolis Fed President Neel Kashkari said earlier this week that future interest rate cuts would be “modest” and emphasized that policy decisions would depend on economic data. Meanwhile, San Francisco Fed President Mary Daly said on Tuesday that there is room for the Fed to lower rates further, following last month’s half point reduction in fed funds to 4.75% to 5.00%

Additionally, persistent geopolitical tensions in the Middle East and US election uncertainty could provide some support to the USD. "Volatility ... and the U.S. dollar tend to rise in tandem going into the U.S. election, especially with the rise of (former U.S. President) Trump in betting markets and the 50 basis-point (bp) cut being out of the picture for the Fed at least in November. This would be the best case for the dollar in the short term,” said Boris Kovacevic, global macro strategist, at Convera in Vienna, Austria.