- The USD/CAD is strengthened to about 1,3645 in the first bars of the Asian session on Friday.
- Canada’s retail sales fell 1.1% intermensual in May, ballasting the Canadian dollar.
- The renewed concerns about the Trump administration and the Fed could limit the rise in the torque.
The USD/CAD pair advances around 1,3645 during the first measures of the Asian session on Friday. The disappointing Canadian economic data lift the Canadian dollar (CAD) against the US dollar. The orders of the US durable goods will be published later on Friday.
The data published by Canada Statistics on Thursday revealed that the country’s retail sales fell 1.1% intermencing in May compared to the previous 0.3%. This figure aligned with expectations. Economists closely monitor retail sales since they offer information about GDP trends. Investors are concerned about the moment and magnitude of tariffs threatened by US President Donald Trump, which anticipated purchases. The Loonie has weakened since retail sales data showed that the domestic economy is weakening.
In addition, investors remain cautious as the deadline of August 1 is approaching before US President Donald Trump begins to impose new tariffs. Canadian Prime Minister Mark Carney said earlier this week that the country “will not accept a bad agreement” with the US.
As for USD, Trump increased pressure on the president of the Federal Reserve (FED), Jerome Powell, with a visit to the Fed offices in Washington. Trump and Powell discussed the costs of the in progress at the headquarters of the Fed. Any surprise movement that climbs the tensions between the administration and the Fed or renewed concerns about the independence of the Fed could drag the US dollar (USD) down in the short term.
Canadian dollar – frequent questions
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.
