The USD/CAD pair extends its upside to near 1.3770 in Friday’s American session. The Loonie asset strengthens as the US Dollar (USD) rises further due to a hawkish interest rate update by the Federal Reserve (Fed). Latest interest rate projections from Fed policymakers indicate that there will be only one rate-cut instead of three forecasted in March.Fed’s hawkish policy has weakened the risk appetite of market participants. Considering bearish overnight futures, the S&P 500 is expected to open on a bearish note. The US Dollar Index (DXY), which tracks the greenback’s value against six major currencies, jumps to 105.70. While 10-year US Treasury yields have declined to 4.22% as financial markets expect that the Fed will deliver two rate cuts.According to the CME FedWatch tool, 30-day Fed Funds futures pricing data shows that traders see a 65% chance that there will be a rate-cut decision in the September. The probability has significantly improved from 50.5% recorded a week ago.Market expectations for Fed rate cuts in September increased after the United States (US) consumer and producer inflation data for May turned out softer than expected.Meanwhile, Cleveland Fed Bank President Loretta Mester appeared in an interview with CNBC after the completion of the blackout period due to the Fed’s monetary policy meeting. Mester acknowledged that the disinflation process has resumed after stalling, however, policymakers want to see price pressures cooling further from their current levels to gain confidence for rate cuts. She also cautioned that the current monetary policy is impacting the economy and it is important not to wait too long to cut interest rates.On the Canadian Dollar front, Statistics Canada showed that Manufacturing Sales grew at a slightly slower pace of 1.1% than expectations of 1.2% in April. The economic data contracted by 1.8% in March, downwardly revised from 2.1%. USD/CAD

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