- The Canadian dollar lost more peso on Thursday while the US dollar continues to rise.
- The Canadian GDP contracted again, taking out the carpet from under an already beaten loonie.
- The US dollar is finding a new bullish impulse thanks to safe shelter flows while markets re -assessment of rates clippings.
The Canadian dollar (CAD) sank for sixth consecutive session on Thursday, driven down due to a second consecutive contraction in the growth of the Gross Domestic Product (GDP) in intermennsual terms. Inflationary pressures and concerns about commercial policy in the US are weighing on the global appetite for risk, reinforcing the US dollar (USD).
The inflation of the US Personal Consumption Expenditure Index (PCE) increased in June, one day after the Federal Reserve (Fed) threw cold water on the hopes of feat cuts in September due to concerns about tariffs and inflation. The income figures in the US also increased in June, adding more pressure to inflation expectations as price volatility factors rise both from the front and from the rear.
What moves the market today: the Canadian dollar loses more peso while the recovery of the dollar extends
- The Canadian dollar fell for the sixth consecutive day against the US dollar, briefly pushing the USD/CC above 1,3850 for the first time since May.
- The Canadian GDP contracted an intermensual 0.1% in June, the second consecutive contraction while the Canadian economy continues to stagger. Despite weak economic data, the Canada Bank (BOC) has tied hands in terms of interest rates, unable to cut more since inflationary pressures remain high.
- The US PCE inflation also accelerated again in June, with the underlying inflation of the PCE by increasing 0.3% compared to the previous 0.2%, and the annualized inflation of the PCE also jumped to 2.8% with the previous period seeing a similar upward review.
- Personal income in the US also rebounded 0.3% in June, putting more salary pressure on inflation metrics.
- The net employment earnings figures of the US NFPs will complete a week of unjoving trading on Friday.
Prognosis of the price of the Canadian dollar
A prolonged setback of the Canadian dollar has pushed the USD/Cad torque to the upper -term end, breaking above the recent consolidation and laying the foundations for a prolonged bullish thrust in the dollar flows. The pair is still trapped below the 200 -day exponential mobile average (EMA) about 1,3900, and deep overcompra conditions in technical oscillators are showing strong warning signs that the strength of the USD could be about to take a break.
USD/CAD DAILY GRAPH
Canadian dollar – frequent questions
The key factors that determine the contribution of the Canadian dollar (CAD) are the level of interest rates set by the Bank of Canada (BOC), the price of oil, the main export product of Canada, the health of its economy, inflation and commercial balance, which is the difference between the value of Canadian exports and that of its imports. Other factors are market confidence, that is, if investors bet on riskier assets (Risk-on) or seek safe assets (Risk-Off), being the positive risk-on CAD. As its largest commercial partner, the health of the US economy is also a key factor that influences the Canadian dollar.
The Canada Bank (BOC) exerts a significant influence on the Canadian dollar by setting the level of interest rates that banks can provide with each other. This influences the level of interest rates for everyone. The main objective of the BOC is to maintain inflation between 1% and 3% by adjusting interest rates to the loss. Relatively high interest rates are usually positive for CAD. The Bank of Canada can also use quantitative relaxation and hardening to influence credit conditions, being the first refusal for CAD and the second positive for CAD.
The price of oil is a key factor that influences the value of the Canadian dollar. Oil is the largest export in Canada, so the price of oil tends to have an immediate impact on the value of the CAD. Generally, if the price of oil rises, the CAD also rises, since the aggregate demand of the currency increases. The opposite occurs if the price of oil drops. The highest prices of oil also tend to give rise to a greater probability of a positive commercial balance, which also supports the CAD.
Although traditionally it has always been considered that inflation is a negative factor for a currency, since it reduces the value of money, the opposite has actually happened in modern times, with the relaxation of cross -border capital controls. Higher inflation usually leads to central banks to raise interest rates, which attracts more capital of world investors who are looking for a lucrative place to save their money. This increases the demand for the local currency, which in the case of Canada is the Canadian dollar.
The published macroeconomic data measure the health of the economy and can have an impact on the Canadian dollar. Indicators such as GDP, manufacturing and services PMIs, employment and consumer confidence surveys can influence the CAD direction. A strong economy is good for the Canadian dollar. Not only attracts more foreign investment, but it can encourage the Bank of Canada to raise interest rates, which translates into a stronger currency. However, if the economic data is weak, the CAD is likely to fall.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
