• The US Dollar extends gains against the CAD and reaches session highs above 1.4000.
• Dwindling bets of a Fed cut in December and risk aversion are buoying the US Dollar on Friday.
• A 2% weekly decline in Oil prices is acting as a headwind for the loonie.

The US Dollar trades higher against its Canadian counterpart for the second consecutive day on Friday, returning to levels right above the 1.4000 psychological level to retrace losses from previous days, and trading practically flat on the weekly chart. The Hawkish comments by Federal Reserve (Fed) Chairman Jerome Powell and a. moderate risk aversion are buoying the Greenback against most of its main peers.

The US Dollar bounced from weekly lows at the 1.3890 area following the Fed’s monetary policy decision on Wednesday. The bank met expectations and trimmed its Federal Funds rate to a three-year low in the 3.75%-4% range, but Chairman Powell rattled markets, affirming that a December rate cut is far from a done deal, which sent US Treasury yields and the US Dollar higher.

Furthermore, the framework agreement between US President Trump and the Chinese Premier Xi Jinping has allowed to extension of the trade truce between the US and China. Trump has pledged to reduce tariffs on Chinese imports in exchange for keeping rare earth trade flowing and resuming purchases of US soybeans, which has provided additional support to the US Dollar.

Also on Wednesday, the Bank of Canada trimmed its benchmark interest rates by 25 basis points, to 2.25% and hinted at the end of the easing cycle, although Goverm¡nor Macklem kept all options open, assuring that the central bank will be ready to respond if Canada’s economic Outlook changed materially.

The Canadian Dollar bounced up following the BoC’s monetary policy decision, but has been losing ground over the last two days, weighed by a firmer US Dollar amid a moderate risk-off mood and falling Oil prices, Canada’s main export. The price of the West Texas Intermediate (WTI) barrel have dropped nearly 2% this week, to levels right above $60.00 at the time of writing, from last week’s highs near $62.50.