- The USD/CAD descends as the US dollar weakens in the midst of growing concerns about the possible economic repercussions of the tariffs imposed by the US.
- The dollar is still under pressure, with the 2 -year American treasure bonus yield falling more than 1% to 3.75%.
- The CAD linked to raw materials can face winds against due to the fall in crude oil prices.
The USD/CAD is depreciated after registering profits in the previous session, quoting around a minimum of six months in 1,3802 during the Asian hours of Monday. The pair faces winds against due to the weakening of the US dollar (USD), being under pressure due to the growing concerns about US economic repercussions for tariffs.
The American dollar index (DXY), which measures the USD compared to a basket of six main currencies, fell more than 0.50%, quoting around 98.50, its lowest level since April 2022, at the time of writing. The dollar faces winds against 2 years of US treasure bonds has depreciated in more than 1%, standing at 3.75%.
The president of the Federal Reserve (FED), Jerome Powell, warned that a slow economy along with persistent inflation could challenge the objectives of the Fed and increase the risk of stagflation. In political developments, Thursday reports suggested the frustration of President Trump with the president of the FED, Powell, even considering his dismissal. Although the markets showed little immediate reaction, the Economic Advisor of the White House, Kevin Hassett, confirmed that Trump is exploring the possibility.
However, the fall of the USD/CAD torque can be limited, since the Canadian dollar (CAD) linked to raw materials could be pressed for the fall in raw oil prices. The West Texas Intermediate (WTI) oil has dropped more than 1%, quoting around $ 62,80 per barrel at the time of writing.
The prices of crude oil were weakened after progress in nuclear negotiations between the United States (USA) and Iran, relieving concerns that geopolitical tensions interrupt the supply of the important producer of the Middle East. According to Iran’s Foreign Minister, both countries agreed on Saturday to write a framework for a possible nuclear agreement, with an American official describing conversations as showing “very good progress,” Reuters reported.
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.
