CANADA FX DEBT-Canadian dollar dips as investors assess sectoral trade deal prospects

By Fergal Smith

TORONTO, Oct 15 (Reuters) - The Canadian dollar edged lower against its U.S. counterpart on Wednesday as oil prices fell and investors assessed prospects of a sectoral trade deal between the U.S. and Canada.

The loonie CAD= was trading 0.1% lower at 1.4050 per U.S. dollar, or 71.17 U.S. cents, after moving in a range of 1.4027 to 1.4059. On Tuesday, the currency touched a six-month low at 1.4079.

Canada has been negotiating with the U.S. in key sectors such as steel, aluminum and autos that have faced punishing U.S. tariffs. Shares of Algoma Steel ASTL.TO were up 8.5% on Wednesday.

"The market for CAD is pricing in some kind of deal but the contours of that are impossible to estimate," said Adam Button, chief currency analyst at investingLive. "There's a lot riding on this ... this is the dress rehearsal for the big negotiation."

The United States-Mexico-Canada trade agreement, which has shielded much of Canada's exports from U.S. tariffs, is up for joint review in 2026.

The U.S. dollar slipped against a basket of peers after comments from Federal Reserve Chair Jerome Powell bolstered bets on a series of interest rate cuts in coming months.

The price of oil, one of Canada's major exports, settled 0.7% lower at $58.27 a barrel, pressured by escalating U.S.-China trade tensions and the International Energy Agency's prediction of a supply surplus in 2026.

Domestic data for August showed wholesale trade falling by 1.2% from July and manufacturing sales down 1%.

Bank of Canada Governor Tiff Macklem is due on Thursday to speak on Canada's economic outlook. Investors see a roughly 60% chance that the central bank will ease interest rates further at a policy decision on October 29. 0#CADIRPR

Canadian bond yields eased across the curve. The 10-year CA10YT=RR was down 3.1 basis points at 3.124%, after earlier touching its lowest level since May 7 at 3.102%.