- The Canadian dollar rose to a maximum of four months on Thursday.
- The ongoing tariff tensions are hitting the US dollar.
- Few Canadian data that is worth mentioning on the agenda this week, but concerns about the recession will limit the profits of the Loonie.
The Canadian dollar (CAD) rose to four -year maximums against the US dollar (USD) on Thursday, driven by a general weakening in the dollar demand. The markets prepare for a prolonged and prolonged commercial dispute between the US and all other countries, since the continuous change of posture of President Trump about his own tariff proposals continues to drag the feeling of the market.
The data of the purchasing managers index (PMI) Canadian at the beginning of this week showed a strong contraction in the expectations of business activity, highlighting a growing underlying current of economic weakness that the Canadian economy is going through. As the Canadian economy continues to grow unequally, specifically against the increase in US tariffs, the Canada Bank (BOC) is prepared to continue cutting interest rates, which could limit the possible profits of the Loonie in the future.
Daily summary of market movements: US IPC inflation is cooled faster than expected, but tariffs could end that
- The US underlying IPC was reduced to 2.8% year -on -year in March, falling below 3.0% for the first time in years.
- Despite inflation indicators in cooling, uncertainty remains high and commercial tariffs will probably send inflationary clashes through the US economy.
- The US maintains a “reciprocal” tariff rate of 10% in all products, as well as a crushing 145% tariff over all Chinese goods imported to the US.
- Those responsible for the Fed monetary policy continue to warn that fees cuts may have to expect much more than market participants currently expect.
- The key feeling of the US consumer that will be published on Friday will be an indicator for inflation expectations for the tariff season.
Prognosis of the price of the Canadian dollar
The Canadian dollar has been working, climbing 2.26% background to top against the US dollar for a period of two days and pushing the USD/CAD torque below the 200 -day exponential mobile average (EMA) about 1,4075 for the first time since last October. Market flows are largely concentrated in the dollar, which implies that any reversion in the feeling will quickly send to the Loonie back to consolidation territory.
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.
