- The Canadian dollar continues close to the maximum eight months against the US dollar.
- Commercial headlines and US -UC inflation data dominate market attention on Wednesday.
- More US inflation data and consumer feeling figures will be published later this week.
The Canadian dollar (CAD) remains close to the maximum of several months against the US dollar (USD) on Wednesday. The Loonie received a slight impulse from the decrease in the dollar offers, with the feeling of investors in the market widely strengthened by a US consumer price index (CPI). The commercial conversations between the US and China also concluded in London during the night session, giving investors the hope that the rhetoric of the commercial war will continue to cool and will pave the way to dismantle exorbitant import taxes of the Trump administration and the restrictions on technological exports.
Canadian economic data remains largely absent from the economic agenda this week. The trend will continue during most of the month as data sets experience a pause. The next lot of inflation figures of the Canadian CPI is scheduled to be published at the end of the month, on June 24.
Market movements in the daily summary: The Canadian dollar is strengthened by the weakness of the dollar
The Canadian dollar remained mostly flat against the US dollar on Wednesday, keeping the USD/CAD torque below 1,3700.
- The US CPI figures were generally below expectations, strengthening market bets for a federal reserve rates (FED) in September.
- According to the CME Fedwatch tool, rates operators are valuing almost 70% probabilities of at least one quarter cut in the main reference rate of the Fed on September 17.
- The US IPC inflation increased less than expected in May, rising to 2.4% year -on -year. The underlying CPC inflation remained flat at 2.8% year -on -year.
- The inflation figures of the US Production Price Index (IPP) are the following on Thursday’s agenda, they are also expected to stay flat at 3.1% year -on -year.
- The impacts of tariff inflation, if they arrive, will probably appear first in inflation metrics at the business level.
Prognosis of the price of the Canadian dollar
The Canadian dollar remains stable, located near its maximum eight months in relation to the US dollar. The recent depreciation of the US dollar, together with the decision to maintain interest rates on the part of the Canada Bank, has sustained the USD/CAD torque below the 1,3700 threshold.
From the peaks observed in February, there has been a persistent descending trajectory. However, technical oscillators are decidedly in overall territory. Although this rebound can lack sufficient strength to alter the general trend, it could mean a setback of imminent 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.
