USD/CAD falls below 1.3550 on expected BoC rate cuts, weak US Job Openings

• USD/CAD slips below 1.3550 as the BoC reduces interest rates by 25 bps to 4.25% as expected.
• The US Dollar corrects sharply after weak US JOLTS Job Openings data for July.
• Investors await the US NFP for August for fresh guidance on interest rates.

The USD/CAD pair drops sharply below the crucial support of 1.3550 as the Bank of Canada (BoC) reduces its key borrowing rates by 25 basis points (bps) for the third straight time, pushing them lower to 4.25%.

The BoC was widely anticipated to reduce interest rates, which didn't lead the Canadian Dollar (CAD) to weaken further. Investors were anticipating a dovish interest rate decision as inflationary pressures in the Canadian economy have been contained significantly. Also, the economy needs a liquidity boost to uplift weakening growth prospects.

Meanwhile, the US Dollar (USD) falls vertically on weak United States (US) JOLTS Job Openings data for July. The report showed that job vacancies come in sharply lower at 7.673 million than estimates of 8.1 million that the former release of 7.91 million, downwardly revised from 8.184 million. Weak job posting data has escalated downside risks to the US job market. The US Dollar Index (DXY), which tracks the Greenback's value against six major currencies, tumbles below 101.40.

On Tuesday, the US Dollar corrected after the release of the downbeat United States (US) ISM Manufacturing PMI for August, which prompted expectations that the Federal Reserve (Fed) could begin the policy-easing process aggressively, which is expected this month.

The ISM agency reported that activities in the manufacturing sector contracted at a faster-than-projected pace, with PMI landing at 47.2 from the estimates of 47.5.

According to the CME FedWatch tool, the likelihood of a 50-basis points (bps) interest rate reduction in September is 39%, while the rest favors a 25-bps decline to 5.00%-5.25%, indicating that rate cuts this month have been fully priced in by traders.

This week, the major trigger for the US Dollar will be the US Nonfarm Payrolls (NFP) data for August, which will be published on Friday. Investors will pay close attention to the official labor market data as the Fed is now more concerned about preventing job loss.