- The USD/CAD collapses about 1,3920 in the first Asian session on Friday, lowering 0.41% in the day.
- The economic uncertainty and the increase in the bets for fed rate cuts drag the US dollar down.
- The US IPC inflation was moderated to 2.4% in March, softer than expected.
The USD/CAD pair extends the fall to around 1,3920 during the first Asian session on Friday. The US dollar (USD) weakens against CAD amid persistent concerns about global and American economies. The operators are prepared for the US Production Price Index (IPP) and the Michigan consumer’s feeling index, which will be published later on Friday.
The president of the USA, Donald Trump, maintained a 10% general tariff over all imports announced last week and established a 90 -day break in additional US tariffs during which the White House will negotiate the highest tariffs. This encouraged investors to reallocate capital back to Canada, supporting the Canadian dollar (CAD) against the USD.
In addition, the dollar loses traction since US consumer prices fell unexpectedly in March. The US consumer price index (CPI) decreased to 2.4% year -on -year in March from 2.8% in February, according to the US Labor Statistics Office (BLS) on Thursday. This figure was below the market consensus of 2.6%.
The underlying IPC, which excludes volatile food and energy prices, increased a 2.8% year -on -year in March compared to the previous 3.1% and was below the 3.0% estimate. In monthly terms, the general CPI decreased by 0.1%, while the underlying IPC rose 0.1%.
After the data, the operators anticipate that the US Federal Reserve (Fed) will resume interest rate cuts in June and will probably reduce their policy rate at a complete percentage point by the end of the year.
Meanwhile, a fall in crude oil prices could weigh on the Canadian dollar linked to raw materials and help limit torque losses. It is worth noting that Canada is the largest oil exporter to the US, and the lowest prices of crude oil tend to have a negative 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.
