- The Canadian dollar rose 0.7% against the US dollar on Friday.
- The optimistic growth figures of the Canadian GDP sent to the CAD operators to look for the purchase button.
- The CAD is back in the range of six months.
The Canadian dollar (CAD) found some upward space on Friday, driven by a growth figure of the Gross Domestic Product (GDP) Canadian of the first quarter better than expected. The continuous commercial turbulence of the Trump administration has kept the US dollar (USD) limping about minimums of several years, giving the CAD the opportunity to gain fresh land.
The Canadian economy grew 2.2% during the first quarter, far exceeding the medium forecasts of the market and taking the CAD back to the recent maximums against the US dollar. However, not everything is positive in the Canadian economic front: consumer spending in general slowed during the first quarter, with the hidden weakness after an increase in imports and exports, since companies spent most of the first quarter by hurrying products towards exit or accumulating goods and products before the start of the global tariff implementation of the Trump administration.
Daily summary of market movements: the Canadian dollar advances as GDP exceeds expectations and reduces Boc’s Tot Cuts
- The Canadian GDP of the first quarter rose 2.2%, comfortably exceeding the medium market forecasts of 1.7%.
- Despite the overcoming of the main figure, Canadian GDP figures are doing a bad job by hiding the growing cracks:
- The Canadian GDP of the previous quarter was drastically reviewed to 2.1% from 2.6%, and more reviews should be expected in the future;
- The actual consumption expenditure decreased in the first quarter, but remains hidden after a significant increase in both exports and imports, since companies accumulated products before US tariffs announced in April.
- Canadian employment figures reveal a growing unemployment gap, particularly among younger Canadians.
- The increase in Canadian quarterly GDP reduced the bets of another rate cut by the Bank of Canada (BOC).
- Rate markets are now valuing at 80% the chances of maintaining the rate in the next decision of the BOC.
Prognosis of the price of the Canadian dollar
The fresh purchasing pressure strengthened the Canadian dollar against the US dollar on Friday, taking the USD/CAD to be within a minimum of six months just below the level of 1,3700. The price action continues to see daily candles by merchanting to the low side, since an ongoing bearish trend maintains the offers in a bearish trajectory.
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.
