- The Canadian dollar found higher ground against the US dollar in trouble.
- An important decision of Fed rates is coming mid -week and could generate new volatility.
- The joint press conference of the Canadian Prime Minister Carney with the US President Trump revealed broad differences in commercial expectations and the lack of clarity of the United States.
The Canadian dollar (CAD) rose against the US dollar (USD), leading to the CAD to recent recent against the dollar and pushing the CAD more than a third of one percent against USD on Tuesday. The feeling of the market found little support after a joint press conference between Canadian Prime Minister Mark Carney and an agitated president of the United States (USA) Donald Trump, who experienced extreme difficulties to offer a coherent political leadership.
Despite a difficult action of President Trump during a key joint press conference, the next decision of Federal Reserve (FED) on Wednesday is the key event of the week, since investors expect signals of a change towards a cycle of feat cuts by fees by those responsible for Fed policies. In the midst of a complicated commercial dispute with the USA.
What moves the market today: the Canadian dollar receives support for the general weakness of the US dollar
- The gain of the Canadian dollar on Tuesday has pushed the USD/CAD to new minimums of several months below 1,3800.
- The figures of the purchasing managers index (PMI) of Canada’s Ivey Seasonally adjusted April showed another strong fall in the expectations of business conditions, falling below 48.0 compared to the expected 51.2.
- The Fed is expected to maintain interest rates without changes on Wednesday, but investors will be looking for statements by Fed officials, and Fed President Jeromy Powell specifically, in search of signs of a possible change towards future feat cuts.
- The joint press conference of Carney and Trump was as good as the markets expected.
- According to Prime Minister Carney, the USMCA trade agreement is currently in force is a good ‘starting point’, but some things about the agreement will have to change. According to President Trump, the USMCA does not need to be renegotiated, but it could be renegotiated, although it is the best for everyone, but it is not yet enough to protect the commercial interests of the United States, all at the same time.
Prognosis of the price of the Canadian dollar
As the general sale of the US dollar continues, the Canadian dollar continues to find higher land compared to USD. The USD/CAD fell to a new minimum of seven months on Tuesday, playing 1,3750 for the first time since October last year.
The impulse remains largely absent in the USD/CAD graph, and geopolitical changes will be the main engine of the action of the future. The pair continues to fall on the southern side of the 200 -day exponential (EMA) mobile average just above 1.4000, and despite a general configuration of the slow graph, the upward inclination still favors the Canadian dollar for the moment.
USD/CAD DAILY GRAPH
Canadian dollar faqs
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.
