- The USD/CAD is depreciated as retail sales and inflation data of Canada increase the probability of a stable BOC posture in June.
- The US dollar extends its losses in the midst of growing concerns about US debt.
- The US deficit could increase by $ 3.8 billion if the “One Big Beautiful Bill” Trump passes through the Senate.
The USD/CAD continues its loss streak that began on May 19, quoting around 1,3710 during the first European hours on Monday. The Canadian dollar (CAD) can be seen against the US dollar (USD) since national retail sales increased for the second consecutive month in April, which indicates strength in the feeling of the consumer despite an aggressive commercial war between the United States (USA) and Canada.
The strongest retail sales data, together with the high inflation data in April, increased the expectations that the Canada Bank (BOC) maintain interest rates at the next June meeting instead of making another 25 basic points cut. This has provided support to the Canadian dollar and has undermined the USD/CAD pair.
In addition, the US dollar fights in the midst of the growing uncertainty around the US economy the US dollar index (DXY), which follows the value of the dollar against a basket of six main currencies, is extending its losses and quoting around 98.90.
During the week, Trump’s “One Big Beautiful” will pass through the Senate after the Fallen Day Holiday on Monday. The Congress Budget Office (CBO) pointed out that Trump’s bill will increase the deficit at 3.8 billion dollars, since it would offer tax cuts on tips and loans for cars manufactured in the US.
On Sunday, American senator Ron Johnson said in CNN: “I think we have enough votes to stop the process until the president takes seriously the reduction of spending and the reduction of the deficit.” Johnson added: “My main approach is now spending. This is completely unacceptable. Current projections are a deficit of 2.2 billion dollars per year.”
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.
