The Canadian dollar edged lower against its U.S. counterpart on Friday as investors raised bets on an oversized interest rate cut from the Federal Reserve, a move which could raise speculation about the Bank of Canada easing in larger steps.

In the end, the Fed decided to go big. The Federal Reserve lowered its key interest rate by a hefty half percentage point Wednesday, moving ahead with its first rate cut in four years and cheering markets that expected an emphatic move amid a softening jobs picture.

The Federal Reserve on Wednesday cut its benchmark interest rate by an unusually large half-point, a dramatic shift after more than two years of high rates that helped tame inflation but also made borrowing painfully expensive for American consumers.

Investor expectations had largely shifted towards a dovish outcome in the days leading up to the Fed's move on Wednesday, with money markets pricing in around a 65% chance of a 50 basis point (bp) cut.