USD/CAD edges lower to near 1.3800 amid fears of looming US recession

• USD/CAD weakens near 1.3805 in Tuesday’s early Asian session.  
• Fears of a looming US recession might trigger the Fed to cut interest rates more aggressively this year. 
• Lower crude oil prices might weigh on the Loonie and cap the pair’s downside. 

The USD/CAD pair trades on a softer note around 1.3805 during the early Asian session on Tuesday. The US Dollar (USD) bounces off the YTD lows near the 102.00 level and hovers around 102.60 amid fears of a US recession. 

A risk sentiment would continue to influence the markets as investors are concerned about the recession in the US economy, which triggered a sell-off among the major stock market indices. Market players are now betting the US Federal Reserve (Fed) to act more aggressively in monetary policy this year.

The Fed is expected to cut its interest rate by 50 basis points (bps) in both September and November and another quarter-point cut in December. According to the CME FedWatch tool, the chance for a 50 bps Fed rate cut at the September meeting is 85%.

On Monday, Chicago Fed President Austan Goolsbee said that the US central bank would respond if economic or financial conditions deteriorate. "We're forward-looking about it, and so if the conditions collectively start coming in like that on the through line, there’s deterioration on any of those parts, we’re going to fix it.” Said Goolsbee. 

On the Loonie front, the further decline of crude oil prices might continue to undermine the Canadian Dollar (CAD) and cap the downside for USD/CAD. It's worth noting that higher oil prices generally support the CAD lower as Canada is the leading exporter of Oil to the United States (US).