- The Canadian dollar is under pressure for the third consecutive day while the US dollar is strengthened by commercial optimism.
- The prices of crude oil rise slightly after Trump threatened to reduce the period for the cessation of putin hostilities from 50 to 10-12 days.
- Canada could face tariffs of up to 35% in its exports if an agreement between the US and Canada is not reached before August 1.
The Canadian dollar (CAD) is still under pressure on Monday, since the week began with the US dollar (USD) recovering land amid a global commercial feeling in improvement. The dollar is receiving a new support for the decrease in tensions between the United States (USA) and the European Union (EU), after the agreement between both parties on a new commercial framework that has raised the general market confidence. Although the agreement has improved the mood of the market in general, the Loonie remains under pressure since the US and Canada have not yet reached a commercial agreement before the deadline of August 1.
At the time of writing, the USD/CAD pair remains stable about 1,3714 during the American negotiation session, with an increase of around 0.10% in the day. The US dollar index (DXY) is rising slightly, around 98.30, its highest level in almost a week, supported by the improvement of commercial feeling. Meanwhile, crude oil prices are rising slightly after US President Donald Trump intensified the pressure on Moscow and threatened to shorten the 50 -day period of Russian President Vladimir Putin to reach a hostilities cessation agreement with Ukraine, offering a modest support to the Canadian dollar linked to oil.
On July 14, during a meeting at the Oval office with the NATO Chief, Mark Rutte, Trump promised severe tariffs on Russia’s business partners if Putin did not reach an agreement with Ukraine. The US President declared that 100% secondary tariffs would impose if an agreement was not reached within 50 days. However, during a joint appearance in the press on Monday with British Prime Minister Keir Starmer on Trump’s property in Turnberry, Scotland, the US president adopted a more urgent tone. Expressing frustration for the lack of progress, Trump declared: “There is no reason to wait. I am very disappointed with President Putin – I am reducing the 50 days I gave to 10 or 12.”
In the Commercial Front, Canada remains under the threat of tariffs of 35% in its exports if an agreement is not reached before the deadline of August 1, with the Secretary of Commerce Howard Lutnick reaffirming during the weekend that the deadline is immovable, “without extensions, without more periods of grace.” On Friday, President Trump maintained a firm tone about Canada, “I have not had much luck with Canada,” he added, saying that he could impose a unilateral tariff rate without further negotiations. “There is not much negotiation, and I am not focused on an agreement with Canada.”
On the Canadian side, Prime Minister Mark Carney and Dominic Leblanc’s Minister of Commerce have minimized the probability of a last minute advance, noting that Ottawa would prefer to withdraw than to sign a rushed or unfavorable agreement. Canadian officials have also expressed concerns that even an agreement may not prevent the US to apply selective tariffs under national security clauses.
Looking ahead, both the Federal Reserve (FED) and the Bank of Canada (BOC) will announce monetary policy decisions on Wednesday. The markets expect both central banks to maintain stable rates, with the approach to change to future orientation amid persistent inflation and ongoing commercial tensions.
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.
