- The Canadian dollar remained stable to close the operations week.
- Canadian labor and salary data barely moved the indicator while investors focus on trade.
- Preliminary commercial conversations between the US and China during the weekend will establish the tone for next week.
The Canadian dollar (CAD) flattened on Friday, keeping near 1,3900 against the US dollar (USD) while the Loonie markets fight to find a reason to move too much in any direction. The feeling of the market is being completely driven by the next commercial conversations between the US and China that are scheduled to start in Switzerland this weekend.
Canadian labor and salary data came mostly as expected on Friday. Canadian salary growth remains stable, and the Canadian economy added some more expected jobs in April. However, the Canadian unemployment rate rose slightly, compensating any increase in hiring better than expected.
Daily summary of market movements: the Canadian dollar moves very little while the US trade dominates
- The Canadian dollar weakened against the US dollar this week, pushing the USD/CAD again above 1,3900 before stagnating on Friday.
- Average Canadian wages remained stable at 3.5% year -on -year until April.
- The net change in Canadian employment exceeded forecasts in April, adding a 7.4K net of new positions against the 2.5K forecast. However, the figure still failed to recover the sharp fall of March 32.6k.
- The Canadian unemployment rate also rose in April, increasing to 6.9% from 6.7%. Medium market forecasts expected an increase to 6.8%.
- What comes next week: Canadian economic data goes to the background once again since The US inflation data becomes the focus.
Prognosis of the price of the Canadian dollar
A new round of weakness of the Loonie this week led the USD/CAD back to the upper part, breaking a period of consolidation of several weeks and pushing offers above 1,3900. The torque is now stable about 1,3930, but the continuous bullish impulse will depend completely on macroeconomic factors while the markets revolve around the ongoing commercial tensions between the US and the rest of the world.
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.
