- The Canadian dollar remained anchored at short -term maximums on Tuesday.
- The significant market movements will come from outside Canada, pressing CAD operators.
- Canadian economic data are widely absent from the calendar this week.
The Canadian dollar (CAD) backed towards the maximum recent against the US dollar (USD) on Tuesday, keeping the USD/CAD restricted below the level of 1,3700. The markets are increasingly focused on commercial holders and imminent inflation data of the US Consumer Price Index (CPI) that will be published on Wednesday.
Canada is completely absent from the economic data calendar this week, and that trend will continue until the end of the month, when Canadian inflation figures are published. They are not expected to be good, but much can change between now and then. Commercial conversations between the US and China are concluding during the night session, but market hopes of obtaining concise details are unlikely to be fulfilled.
Daily summary of market movements: Canadian dollar at the mercy of the headlines and data of the US this week
- The Canadian dollar opposed the dollar profits on Tuesday, keeping USD/CAD near minimum of eight months below 1,3700.
- Markets expect commercial conversations between the US and China to result in a decrease in tariff pressures and relaxation of commercial restrictions, but it is unlikely that firm policy changes will occur if they have not yet been announced.
- The US IPC inflation data scheduled for Wednesday will be the first reference period of the CPI that includes subsequent dates to “reciprocal” global tariffs of the Trump administration, and investors are preparing for the first impacts of prices volatility.
- The US CPI is expected to increase in annualized terms, and a hotter fact than expected could further delay the hopes of the rate cuts market by the Federal Reserve (FED).
- At present, rates operators are valuing a return to Fed interest rate cuts in September.
Prognosis of the price of the Canadian dollar
The Canadian dollar remains stable, near its maximum eight months against the US dollar. The recent weakness of the US dollar, together with the stability of the interest rates of the Bank of Canada, has kept the USD/CAD below the 1,3700 level.
There is a downward trend consistent from the February maximum. That said, technical oscillators are firmly in overall territory. While this rebound may not be strong enough to interrupt the existing trend, it could indicate an upcoming decline due to exhaustion.
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.
