- The Canadian dollar weakens in the field of Trump tariff fears and uncertainty about trim cuts from Boc
- USD/CAD remains firm above 1,4200 while risk aversion raises the US dollar.
- The increase in inflation in Canada could delay the relaxation of the BOC, adding uncertainty.
- The operators expect the FOMC minutes to know the position of the Fed on the time of the feats of fees.
The Canadian dollar (CAD) goes back against the US dollar (USD) on Wednesday, with the USD/CAD torque remaining afloat above 1,4200 level in the midst of renewed fears on the tariff threats of US President Donald Trump. The lack of Canadian data left operators drifting towards the United States Economic Agenda (USA), particularly January housing data.
The Canadian economic agenda was empty, however, the last round of inflation data showed an increase, indicating that the Canada Bank (BOC) might think twice before relaxing politics. In the US, the beginnings of housing in January disappointed investors, although construction permits showed that construction continued to increase, although at an anemic pace.
The US economic agenda today will also include the publication of the latest minutes of the Federal Reserve Monetary Policy Meeting (FED). On the dates of January 27 to 28, the Fed decided to keep the firm rates, pausing its relaxation cycle as inflation charged impulse. It is worth mentioning that the president of the Fed, Jerome Powell, adopted a slightly aggressive tone, saying that they are not in a hurry to cut interest rates.
Since then, most Fed officials have adopted a slightly cautious posture, adopting a waiting mode regarding inflation.
Daily market summary: The Canadian dollar struggles to recover in the US mixed data medium.
- The beginnings of housing in the US abruptly fell 9.6% in January, falling from 1,515 million to 1,366 million, since adverse climatic conditions impacted the construction activity.
- In contrast, construction permits in the US increased slightly, rising 0.1% of 1,482 million to 1,483 million during the same period, pointing out resilience in future construction plans.
- The differentials of interest rates between Canada and the United States continued to weigh on the Canadian dollar, which was pressed for the third consecutive day. The USD/CAD reached a weekly maximum of 1,4244.
- However, a reversal is coming since the BOC could keep the rates under control after the publication of the January CPI data. In that result, the USD/CAD could point down as the Canadian dollar is seen against the US dollar.
USD/CAD price forecast: The Canadian dollar is preparing to appreciate more, despite registering losses
The USD/CAD bullish trend lost impulse after the PAR reached a maximum of about 1,4800. Since then, sellers have taken control, pushing prices below the single mobile (SMA) average of 50 days in 1,4338 and exceeding the minimum daily of January 20, 1,4260, a crucial level for buyers. A greater decrease is expected if the bassists push the spot prices below the 100 -day SMA in 1,4111.
Otherwise, if buyers raise the USD/CC above 1,4300, they must recover the 50 -day SMA to keep the hope of higher prices.
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 the confidence of the markets, 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.
