- The Canadian dollar rose more than 0.5% on Wednesday while markets hit the US dollar.
- Investors are growing apprehensive from the US dollar as the yields of treasure bonds rise.
- Concerns about the federal budget deficit and a stubbornly motionless Fed are affecting investor confidence.
The Canadian dollar (CAD) received a firm offer on Wednesday, raising half a percentage point during the market session in the middle of the week. It is a session with few data during the US market window, and the markets are agitated while the holders on the federal debt and the increase in treasure yields trigger market confidence towards the land.
The prices of the new house in Canada surprised to contract in April. The data is strictly low level, but the possible return of the affordability of housing in one of the most expensive developed countries in terms of housing is providing some support to the CAD. The shocking Canadian economic data will continue to be limited during the rest of May, with the next decision of Rates from the Bank of Canada (BOC) scheduled for June 4.
What moves the market today: the Canadian dollar receives an offer while the markets care about debt and returns
- The Canadian dollar is on the short term, but it still has a lot of work to do to compensate for the early losses of May.
- The US Treasury Bonds saw both increases in yields and a decrease in demand on Wednesday, since concerns about the US government debt are revived.
- A recent increase in crude oil prices is helping to provide some support to CAD. Barril offers have made an intermittent recovery since recent minimums.
- The US Government is on the way to approve the “Great Fiscal Law” of President Donald Trump that will add 4 billion dollars to the US deficit for the next ten years.
- The heavy budget and light budget comes just after the US lost its triple A sovereign debt rating of the Moody’s qualification agency for the first time in more than a century.
Prognosis of the price of the Canadian dollar
The Canadian dollar has gained ground against the US dollar during three consecutive negotiation sessions, pushing the USD/Cad back to a defensive position and sending the offers again to the 1,33850 region. As the CAD reduces the short -term losses against the US dollar, the USD/CAD is trapped in a downward pivot below the 200 -day exponential (EMA) average about 1,4025. The technical oscillators are still trapped in a downward pivot, but they still have a lot of space to move before reaching the over -sales territory, which implies that the USD/CAD could have room to move even more down.
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.
