- The Canadian dollar gained fresh ground against the US dollar on Thursday.
- The USA.UU.U. IPP inflation data than expected pushed the dollar down while the Fed fees are increased.
- Canadian economic data is still limited during the rest of the month.
The Canadian dollar (CAD) shot new eight -month maximums against the US dollar (USD) on Thursday, pushing the USD/CAD torque at its lowest levels since last October and testing the 1,3600 region. The inflation figures of the US Production Price Index (IPP) arrived faster than expected in May, dissipating the fears of inflation sparks driven by tariffs and pushing investors towards the strongest bets for a federal reserve rate cut (Fed) in September.
Canadian economic figures remain scarce on the data agenda for the rest of the month, at least until the last round of inflation figures of the Canadian consumer price index (CPI) that will be published on June 24. The Bank of Canada (Boc) recently broke its trend of seven consecutive rate cuts, maintaining stable interest rates at 2.75% in its last decision. The BOC is not expected to meet again to discuss interest rates until its next policy meeting on July 30, and Loonie operators have some time and some key data sets before trying to find out if the BOC has been deterred from its rate of feat cuts.
What moves the market today: the Canadian dollar finds new maximums against the dollar that collapses
- The Canadian dollar shot more than half percent against the US dollar on Thursday.
- The US -producing inflation came colder than expected, reinforcing bets for a fed rate cut.
- According to the CME Fedwatch tool, rates operators are valuing almost 80% probability of at least one quarter cut by the Fed in September.
- Loonie data observers will be forced to wait until the end of the month for the next significant Canadian economic data lot.
- The key feeling of the US consumer will close the negotiation week with the consumer’s feeling index of the Michigan University scheduled to be published on Friday.
Prognosis of the price of the Canadian dollar
The generalized weakness of the US dollar has reinforced the Canadian dollar to new maximums, pressing the USD/CAD torque to the 1,3600 zone for the first time in eight months. The pair follows a dedicated descending channel, losing ground in a constant way after reaching maximums of several decades in February about 1,4800.
USD/CAD DIARY 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.
