- The USD/CAD falls for the third consecutive day in the midst of a combination of negative factors.
- The increase in crude oil prices and the reduction of bets to a trim of BOC rates in June support CAD.
- Betting for a Fed fees and fiscal concerns of the USS weigh on the USD and contribute to the fall.
The USD/CAD torque extends the impulse of rupture of the previous day below a negotiation range of one week and attracts sellers for the third consecutive day on Wednesday. This also marks the fourth day of a negative movement in the last four and drags counts below the 1,3900 brand, or a minimum of almost two weeks during the Asian session.
Crude oil prices reached a maximum of almost a month amid reports that Israel is preparing for an attack on Iranian nuclear facilities, which generates concerns about the interruption of supply in the Middle East region. In addition, the signs of stagnation in the nuclear conversations between the US and will support the black liquid, which, in turn, is considered to support the CAD linked to raw materials. In addition, the Canadian underlying inflation figures higher than expected published on Tuesday discouraged the hopes of a rate cut of the Canada Bank (BOC) in June and provided an additional impulse to the Canadian dollar (CAD).
This, together with the prevalent seller bias of the US dollar (USD), exerts additional pressure on the USD/CAD torque. In fact, the dollar index (DXY), which follows the value of the green ticket in front of a foreign exchange basket, falls to a minimum of two weeks amid concerns about the US fiscal health and bets that the Federal Reserve (FED) will further reduce the indebtedness costs in 2025. In addition, Fed officials on Tuesday expressed concerns about the economic perspectives of the US uncertainty about Trump administration policies. Apart from this, renewed commercial tensions between the US and China weigh on the dollar.
The drop of the USD/CAD torque could also be attributed to some technical sales after a break below the lower limit of a short -term negotiation range. This, together with the fundamental background mentioned above, suggests that the path of lower resistance for the USD/CAD torque remains down and supports the most deep losses perspectives. In the absence of relevant economic data on Wednesday, the Speeches of influential members of the FOMC will boost the demand of the USD. Apart from this, the dynamics of oil prices should provide some impulse to cash prices.
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.
