- The US dollar approaches the minimum of the year in 1,3565 as demand for safe shelters decreases.
- The highest oil prices are acting as support for the Canadian dollar.
- The markets are positive in which the meeting between Trump and Carney could bring some advances in a tariff agreement.
The attempted recovery of the USD/body seen during the early trade on Monday has failed to find acceptance above 1,3600. The pair retreated profits subsequently, weighed by the widespread weakness of the US dollar, and is approaching at least eight months in 1,3565.
The dollar recovered the beginning of the week with a moderately positive tone, and cut some losses, favored by a significant reversal in oil prices. The reference WTI in the US corrected 3% downward in early trade, going from $ 75.00 to levels just above $ 71, dragging the body sensitive to raw materials with them.
The US dollar loses ground as the demand for safe shelters fades
The torque, however, could not extend the profits beyond the level of 1,3600, with the fears of the conflict between Iran and Israel decreasing, which has undermined the demand for shelter assets. Several countries have been offered to mediate in the war, and US President Trump is pressing rivals to find an agreement, which has contributed to relieve market concerns.
On the other hand, a news report published during the weekend revealed that the agreement of last week between the US and China could have left the key issue of rare earth trade. This has revived concerns about tariff uncertainty, since the clock advances towards the deadline of July 9 without significant progress in commercial agreements.
In Canada, a moderate optimism that the meeting scheduled between US President Trump and Canadian Prime Minister Mark Carney before the G7 summit could help bring the parties closer to some commercial commitment is acting as a support for the 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 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.
