- The Canadian dollar lost more peso on Thursday.
- Investors are bidding again for the US dollar after a fall earlier.
- The US data and headlines dominated the news feed as Canadian factors decrease.
The Canadian dollar (CAD) lost more peso on Thursday, falling to its lowest offers against the US dollar (USD) in almost a month, since the market flows based on the dollar reversed again towards the USD. The optimistic economic data of the United States (USA) reinforced market confidence, but the probabilities of an accelerated rate of features of fees by the Federal Reserve (Fed) remain limited, keeping the dollar at a high level.
The low -level Canadian economic data went to the background, with the exhausted Loonie data agenda after the acceleration of the inflation of the consumer price index (CPI) of this week. The Bank of Canada (Boc) is less and less likely that more rates cuts implement, leaving the CAD at the mercy of market flows in general.
Daily summary of market movements: the increase in the US PPIs generates renewed confidence in investors
- The Canadian dollar fell for the second consecutive day against the US dollar in the middle of a growing resurgence of the USD.
- The USD/CAD tested new intradic maximums above 1,3750 for the first time in almost a month.
- The inflation figures of the US Production Price Index (IPP) arrived faster than expected in June, reinforcing market hopes that tariffs will have a lower impact than many expected or feared.
- However, critical factors limit the bullish potential of the impact of the PPI: the imported goods that are subject to tariffs are overwhelmingly excluded from the PPI basket.
- The key feeling of the US consumer will be published on Friday and will dominate the feeling of investors to close the week.
Prognosis of the price of the Canadian dollar
The renewed weakness of the Canadian dollar is entirely due to a new promoting impulse behind the dollar, however, the net effect is the same: the USD/CAD is back at three weeks, and hitting the exponential mobile average (EMA) of 50 days about 1,3755 for the first time since April.
The torque is extending a technical recovery that reinforces the dollar, dragging the USD/CAD again in the graphics from a messy double floor pattern formed in the 1,3600 region.
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.
