- The Canadian dollar lost more land on Wednesday, falling for a fifth consecutive session.
- The CAD was pressed by the weight of a US dollar rising, since the Fed moderates the expectations of rate cuts.
- A commercial agreement between the US and Canada outside the existing USMCA seems increasingly unlikely.
The Canadian dollar (CAD) yielded more peso against the US dollar (USD) on Wednesday, with the flows of the body still hindered by a generalized setback towards the secure shelter of the dollar. The Federal Reserve (FED) maintained interest rates without changes, such as most investors, but the president of the Fed, Jerome Powell, adopted a remarkably cautious tone, discouraging the hopes of a fence of fees in September.
The continuous weakness of the Canadian dollar has pushed the USD/Cad to return to the top of the tables, strengthening the torque above 1,3800 for the first time since May. The torque has exceeded short -term technical levels around 1,3750, and the next challenge for the dollar bundles (or sellers of CAD) will be to take the USD/CAD again above the 200 -day exponential mobile average (EMA) about 1,3900.
The Bank of Canada (BOC) also kept the stable interest rates earlier on Wednesday, removing more impulse to CAD operators. Citing continuous inflationary risks of non -energy goods and global commercial tensions, the BOC has been pushed to a waiting and seeing position, while the Canadian government hopes to see what will happen after the promises of the president of the US, Donald Trump, to reinstate broad tariffs after August 1.
What moves the market today: central banks dominate the financial landscape on Wednesday
- The Canadian dollar accelerated more losses against the dollar, falling more than half percent in the day and registering a fourth consecutive loss session against the US dollar.
- The Fed maintained interest rates without changes on Wednesday, as the markets waited widely.
- The probabilities of a Fed rates cut in October were decimated after the caution statements of the president of the Fed, Jerome Powell, and the rates markets are now optimistic about a cut of interest rates of a quarter quarter in October.
- The Boc remains in a similar waiting and seeing position, since multiple countries expect to see how tariff impacts on the main economic data will be developed in the coming months.
- MACKLEM DEL BOC statements: US trade policy remains unpredictable
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.
