- The Canadian dollar recovered 1.55% on Tuesday.
- The threats of US tariffs on Canadian products have evaporated.
- The US and Canada’s employment figures are coming at the end of the week.
The Canadian dollar (CAD) shot on Tuesday after the feeling of the market was recovered from an episode of tariff fears, sending the Canadian dollar high enough to fall again in the territory of family consolidation after a brief test of minimum of minimums of two decades.
A 25% rigid tariff on all Canadian products and an import rate of 10% on Canadian energy products were suspended for 30 days by the US president, Donald Trump, on Monday. USA has agreed to temporarily suspend its plans to tax their own citizens for demanding products made in Canada, which includes approximately 60% of all fuel consumed in the US and approximately 40% of all purchased vehicles . With a third attempt at President Trump’s tariffs, investors are likely to see any future threat of import tariffs as a mere pressure measure so that Donald Trump ensures concessions of key commercial allies with the US which had already been agreed with the previous US administration.
Daily Markets Summary: The Canadian dollar recovers land after the fall by tariffs
- The Canadian dollar bounced 1.55%, sending the USD/Cad to the consolidation range.
- The US commercial tariffs on Canada have been suspended for 30 days.
- Investors are likely to discard future tariff threats such as mere posture, limiting their effectiveness in the future.
- Canada’s employment figures will be published at the end of this week, scheduled for Friday. The Canadian unemployment rate is expected to increase 6.8% from 6.7%, and the net variation of employment is expected to decrease to 25,000 from 90.9K in January.
- It is likely that Canada’s work data is completely eclipsed by the US non -agricultural payroll figures that will be published at the same time. It is expected that the net employment gains of the US NFPs decrease to 170,000 from 256,000, and retroactive reviews are also expected.
Prognosis of the price of the Canadian dollar
The fall and rebound of the Canadian dollar sent to the USD/CAD briefly at a maximum of two decades about 1,4800 before correcting abruptly below the level of 1,4400 on Tuesday. Despite the firm profits behind the Loonie, the correction of Tuesday was only enough to plant the USD/Cad back in its recent consolidation range between 1,4300 and 1,4500.
The price action continues in a family pattern, although with fast peaks in any direction while the torque moves in the middle range.
USD/Daily graphic CAD
Canadian dollar faqs
The key factors that determine the contribution of the Canadian dollar (CAD) are the level of interest rates set by the Canada Bank (BOC), the price of oil, the main export product of Canada, the health of its economy, Inflation and trade balance, which is the difference between the value of Canadian exports and that of their 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.
