- The USD/CAD gains land to around 1,4320 in the American session on Wednesday afternoon.
- The FED maintained its federal reference fund rate in a range of 4.25% -4.5% at its March meeting on Wednesday.
- The operators prepare for the speech of the governor of BOC, Macklem.
The USD/body gains strength to around 1,4320 during the American session on Wednesday afternoon. The dollar advances against the Canadian dollar (CAD) since the Federal Reserve (FED) maintained the stable interest rate at the March meeting, as expected. The governor of the Bank of Canada (BOC), TIFF Macklem, is scheduled to speak on Thursday about uncertainty related to tariffs.
The US Central Bank decided to maintain its stable reference interest rate per second consecutive meeting on Wednesday in the midst of growing concerns that the economy is slowing down and that inflation could continue to be persistently high. The president of the FED, Jerome Powell, emphasized the high degree of uncertainty for significant changes in the policy of the US president, Donald Trump, adding that Fed officials can expect more clarity on the impact of these policies on the economy before acting.
New economic projections indicated that Fed officials reduced their growth forecasts for this year, but they still see another cutting cut cutting in the rates until 2025. The most aggressive comments of the Fed officials on the fees since December provide some support to the US dollar (USD) in general.
On the other hand, a rebound in crude oil prices in the midst of the growing geopolitical tensions in the Middle East could boost the Canadian dollar linked to raw materials and create a wind against the USD/CAD. It is worth noting that Canada is the largest oil exporter to the United States (USA), and the highest prices of crude oil tend to have a positive impact on the value of 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.
