- The Canadian dollar lost 0.25% against the dollar on Wednesday.
- The Canada Bank cut the interest rates in another 25 basic points, up to 3%.
- The Boc also announced the end of its quantitative hardening program.
The Canadian dollar lost a quarter percentage quarter against the dollar on Wednesday, going back after the Canada Bank (Boc) cut another 25 basic points of interest rates, carrying the main reference rate of the BOC to 3.0%. The Canadian interest rate reached a maximum of 5% in July 2023, and the last cut of the BOC rates follows two consecutive cuts of 50 basic points in October and December last year.
The Bank of Canada also announced the end of its quantitative hardening program, and it is expected to restart asset purchases in early March. However, the governor of the BOC, Tiff Macklem, retracted, saying that the BOC does not expect to completely restart the quantitative flexibility programs immediately. The imminent threat of generalized commercial tariff of 25 basic points in March.
Daily Markets Summary: The Canadian dollar loses peso after the trimming of Boc rates
- Despite retreating after the trim of the Boc, the Canadian dollar continues to remain within its recent range, keeping the USD/body limited near the level of 1,4400.
- With the interest rate differential of the CAD against the US dollar, expanding even more towards the second quarter, the loobbles of the Loonie have a limited margin to advance.
- Tariffs are the imminent threat to the BOC policy position in 2025.
- Those responsible for the BOC policy have dismissed at the moment that the Loonie is at a minimum of several years against USD, but the continuous falls could cause policy adjustments in the future.
- The BOC also included a slight upward review of inflation forecasts, now they see that annualized inflation metrics will be maintained slightly above the 2.0% target until 2026.
- Governor of Bock Macklem: The threat of tariffs weighed in the bank’s decision
Prognosis of the price of the Canadian dollar
The Canadian dollar has lost some peso against the US dollar for three consecutive negotiation days, going back around four tenths of a percentage point during the first half of the negotiation week and strengthening USD/CC above the level of 1,4400. The torque has been in an irregular lateral movement for more than six weeks after the Loonie fell to a minimum of several years against the dollar and the USD/CAD reached 1,4500 for the first time from the pandemic.
The USD/CAD price action remains limited in an irregular flat channel between 1,4300 and 1,4500, with offers that continue to rotate around 1,4400 in a round trip graphic impulse. The torque is generally prepared for upward break in the graph above 1,4500, but a setback below the 50 -day exponential (EMA) mobile average that goes up to 1,4270 could see an extended bearish fall.
USD/Daily graphic CAD
Canadian dollar faqs
The key factors that determine the contribution of the Canadian dollar (CAD) are the level of interest rates set by the Canada Bank (BOC), the price of oil, the main export product of Canada, the health of its economy, Inflation and trade balance, which is the difference between the value of Canadian exports and that of their 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.
