USD/CAD falls toward 1.3750 as US Dollar declines on Fed concerns

• USD/CAD depreciates amid rising concerns over Fed independence.
• Fed Governor Cook's exit could increase the likelihood of interest rate cuts.
• BoC Governor Macklem stated that the central bank will maintain its 2% inflation target for the foreseeable future.

USD/CAD extends its losses for the third successive session, trading around 1.3770 during the Asian hours on Thursday. The pair depreciates as the US Dollar (USD) faces challenges amid rising concerns over the US Federal Reserve's (Fed) independence. Traders await the Q2 US Gross Domestic Product (GDP) Annualized due later in the day.

US President Donald Trump announced early Tuesday that he was removing Fed Governor Lisa Cook from her position on the Fed's board of directors. He also said that he was ready for a legal fight with Cook over falsified mortgage documents.

The dismissal of Fed Governor Cook could increase the likelihood of heavy interest rate cuts, given Trump's ongoing pressure on the central bank to reduce borrowing costs. Traders are now pricing in more than 88% odds for a cut of at least a quarter-point at the Fed's September meeting, up from 82% the previous week, according to the CME FedWatch tool.

China's top trade negotiator Li Chenggang said on Thursday that China and Canada had frank, pragmatic, and constructive exchanges on improving and developing bilateral economic and trade relations. China is ready to manage differences through constructive methods and pragmatic actions.

Bank of Canada (BoC) Governor Tiff Macklem said on Wednesday that the central bank will not reconsider its 2% inflation target in the foreseeable future, citing uncertainty over trade and shifting US tariff policies. Macklem noted that supply-side headwinds could add upward pressure on inflation in the period ahead. He added that by using scenario analysis, the BoC was able to make a monetary policy decision suited to a range of potential economic outcomes.