- The Canadian dollar experienced Altibajos on Wednesday, finding new profits to the problems of the US dollar.
- Canadian economic data is still limited after the inflation update this week.
- Trump is pointing out his intention to dismiss Powell as president of the Fed, but he needs the help of Congress to do so.
The Canadian dollar (CAD) experienced Altibajos on Wednesday, launched in seas of tumultuous feeling while the US dollar (USD) fights with the continuous political volatility of the Trump administration. The inflation data of the United States Production Price Index (IPP) (USA) is colder than expected generated a slight appetite due to the risk among investors, but the environment quickly deteriorated as President Donald Trump intensifies his attacks against the president of the Federal Reserve (Fed), Jerome Powell.
Daily summary of market movements: the Canadian dollar captures new offers for the weakness of the dollar
- The Canadian dollar captured a slight increase against the dollar after a volatile start.
- 1,3700 remains a key technical barrier in the USD/CAD graph.
- The US IPP inflation was moderated more than expected in June, falling to 2.6% from 3.0%.
- The president of the USA, Donald Trump, continues his campaign against the president of the FED, Powell, and seeks to recruit the Republicans of the Congress to allow him to avoid clear legal barriers.
- With the political autonomy of the Fed now in question, volatility is increasing and risk aversion begins to cook.
Prognosis of the price of the Canadian dollar
The Canadian dollar dismissed the initial losses on Wednesday, pushing at the USD/Cad torque to the 1,3700 area. The PAR continues to fight with decisive movements in any direction, and a deconial mobile average (EMA) of 50 days about 1,3750 in the daily candles is being formed.
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.
