- The USD/CAD invested its address and fell below 1,3800 on Friday.
- The USD was subjected to strong sales pressure after the discouraging employment data.
- The Trump administration increased the tariff rate on Canadian imports to 35%.
The Canadian dollar (CAD) erased a part of its weekly losses against the US dollar (USD) on Friday after the disappointing Employment report of the US July of the USA at the time of publication, the USD/CAD pair was quoted at 1,3795, losing around 0.5% in daily terms.
The USD collapses while the markets are inclined to a Fed fees cut in September
The monthly data published by the US Labor Statistics Office (BLS) showed on Friday that non -agricultural payroll (NFP) increased by 73,000 in July. This figure did not meet the market expectation of 110,000. In a worrying note, the BLS reviewed NFP increases for May and June in 125,000 and 133,000, respectively.
“With these reviews, employment in May and June is 258,000 less than what was previously reported,” said the BLS in its press release.
Meanwhile, the unemployment rate rose slightly 4.2% from 4.1% in June, as anticipated.
The USD was subjected to a strong sales pressure while investors re -evaluated the probability of a 25 basic points rate cut by the Federal Reserve (Fed) in September. According to the CME Fedwatch tool, markets are currently valuing approximately 70% probability of a 25 basic points cut at the next meeting, compared to 33% before employment data.
Earlier on the day, the White House announced late on Thursday that the US president Donald Trump has signed an executive order by increasing Canada’s tariff from 25% to 35%. Canada’s Prime Minister Mark Carney said they are disappointed with the US decision to increase tariffs and added that they will remain focused on what they can control, while the negotiations continue.
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.
