USD/CAD holds steady above 1.3850 amid rising odds of BoC rate cut

• USD/CAD flat lines around 1.3870 in Thursday's early Asian session.
• The Fed Minutes noted that almost all participants advocated for maintaining the status quo. 
• Investors raise bets on the BoC cutting interest rates over the coming months.

The USD/CAD pair trades flat near 1.3870 during the early Asian session on Thursday. The Canadian Dollar (CAD) steadies against the US Dollar (USD) near an earlier three-month low as the latest Canadian inflation data raised odds that the Bank of Canada (BoC) would resume its easing campaign. The preliminary reading of the US S&P Global Purchasing Managers Index (PMI) reports will be in the spotlight later on Thursday. 

According to the minutes of the Federal Open Market Committee's (FOMC) July 29-30 meeting, most Federal Reserve (Fed) officials highlighted the risk to inflation as outweighing concerns over the labor market at their meeting last month, as tariffs fueled a growing divide among Fed policymakers. 

Almost all participants viewed it as appropriate to maintain the benchmark interest rate in the 4.25%-4.50% range and noted that it would take time to have more clarity on the magnitude and persistence of higher tariffs' effects on inflation. 

Traders await the Fed's annual Jackson Hole symposium later on Friday for clues on the US interest rate path. If Fed Chair Jerome Powell leans dovish on interest rates, this might drag the USD lower against the CAD in the near term. 

Traders raise their bets that the BoC would deliver a rate reduction at the next policy decision in September after data on Tuesday showed a sharp deceleration in 3-month annualized measures of underlying inflation that are closely watched by the BoC. This, in turn, could weigh on the Loonie and create a tailwind for the pair. 

Markets are now pricing in nearly a 70% odds of a BoC rate cut in September, up from 56% before the Canadian Consumer Price Index (CPI) inflation data. The Canadian central bank has been on hold since lowering its benchmark rate to 2.75% in March.