- The USD/CAD meets new sales on Friday and is pressed for a combination of factors.
- The fiscal concerns of the US, the commercial tensions between the US and China, and the DOVISH expectations of the Fed weigh on the USD.
- The reduction of bets due to a trim of BOC rates in June supports the CAD and exerts pressure on cash prices.
The USD/CAD torque attracts new sellers after the brief pause of the previous day and falls to the area of ​​1,3825 during the Asian session on Friday. Cash prices remain close to a minimum of two weeks reached on Wednesday and seem vulnerable to weakening even more in the middle of a US dollar (USD) in general weaker.
The operators increased their bets due to more interest rate cuts by the Federal Reserve (FED) after the US Consumer Price Index (CPI) softer last week and the production price index (IPP). In addition, the concerns that the so -called “great, beautiful project” of the president of the US, Donald Trump, would worsen the budget deficit at a faster rate failed to help the USD consolidate the profits inspired by the mostly optimistic data of the US on Thursday. This, in turn, is considered a key factor that exerts some downward pressure on the USD/CAD torque.
Meanwhile, the prices of crude oil stop in the decline drop of this week from a peak of almost a month, since the uncertainty about the nuclear conversations between the US will relieve the overestimate concerns fueled by reports that the OPEC+ is discussing an increase in production for July. In addition, the decreasing probabilities of a rate cut by the Canada Bank (BOC) in June, backed by the highest Canadian inflation figures published on Tuesday, support the Loonie linked to raw materials and contribute to the fall of the USD/CAD pair.
The aforementioned fundamental background suggests that the least resistance path for cash prices remains down. Even from a technical perspective, the break this week through a short -term negotiation range support near the 1,3900 brand validates the short -term negative perspective for the USD/CAD torque and supports the perspectives of a new movement down. The operators now wait for the monthly data of retail sales of Canada and the sales data of new US housing to obtain a new impulse.
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.
