Canadian Dollar steadies as Fed Minutes and political tensions weigh on Greenback

The Canadian Dollar (CAD) steadies against the US Dollar (USD) on Wednesday, as political pressure on the Federal Reserve (Fed) drags the Greenback lower. At the time of writing, the USD/CAD pair is trading near 1.3866 during the American session, easing from a fresh three-month high of 1.3883 reached earlier in Asian trading.

The US Dollar Index (DXY), which tracks the Greenback against a basket of major currencies, is paring gains after hitting a one-week high of 98.44 earlier in the day. At the time of writing, the DXY is trading near 98.15, as market participants adopt a cautious stance ahead of the Federal Reserve’s July meeting Minutes, set for release at 18:00 GMT.

Trump targets Fed’s Lisa Cook, calls for resignation

The US political landscape took a dramatic turn after President Donald Trump publicly called for the resignation of Fed Governor Lisa Cook on Wednesday. Posting on his Truth Social platform, Trump accused Cook of mortgage fraud, amplifying allegations made by Federal Housing Finance Agency (FHFA) Director Bill Pulte, who urged the Department of Justice to investigate the matter.

So far, there has been no official response from Governor Lisa Cook or the Federal Reserve, but the controversy marks a sharp escalation in President Trump’s efforts to reshape the central bank, stoking renewed concerns over the Fed’s independence. On Tuesday, Trump also intensified his criticism of Fed Chair Jerome Powell, accusing him of “hurting the housing industry” by keeping rates too high and calling for aggressive rate cuts. These remarks come just days ahead of Powell’s highly anticipated speech at the Jackson Hole Symposium on Friday, where investors will closely watch for any dovish shift in tone amid mounting political pressure.

Canada’s inflation data softens, boosting BoC rate cut bets

On the Canadian side, data released on Tuesday showed that annual headline inflation eased to 1.7% in July, down from 1.9% in June and broadly in line with expectations. The decline was largely driven by a steep drop in gasoline prices. However, underlying price pressures remain persistent, with the Bank of Canada’s preferred core inflation gauges still hovering near the upper end of the central bank’s 1-3% target range.

Importantly, the three-month average of core inflation slipped to 2.4%, signaling weakening underlying momentum. In response, traders increased bets on further monetary easing from the Bank of Canada, with overnight swaps pricing in a 39% probability of a rate cut, up from around 31% earlier in the week.