- The USD/CAD is negotiated in a flat tone around 1,4275 in the American session on Tuesday afternoon.
- Concerns about US tariffs and the next Canadian elections could weigh on CAD.
- The highest prices of crude oil could help limit the losses of the CAD.
The USD/CAD torque is maintained by around 1,4275 during the American session on Tuesday afternoon. The Canadian dollar (CAD) cuts profits against the US dollar (USD) in the midst of uncertainty around Canadian general elections and new US trade tariffs that are expected for April 2.
With the Canadian elections approaching, the Liberal Party in the power and the official opposition, the conservatives, were effectively tied in the surveys conducted just before the campaign began on Sunday.
Bannockburn Global Forex analysts pointed out the impact of the electoral result and the possible US tariffs, particularly after US President Donald Trump indicated that cars tariffs will soon be implemented, while cars will be implemented, while hinting that not all his threatened tariffs will be imposed on April 2 and some countries could receive exceptions. Uncertainty about tariffs and elections will probably undermine CAD in the short term.
On the other hand, an increase in crude oil prices could raise the CAD linked to raw materials and act as a wind against the USD/CAD. It should be noted that Canada is the largest oil exporter to the United States (USA), and the highest prices of crude oil tend to have a positive impact on the value of the CAD.
As for the dollar, speculation about an economic slowdown in the US economy could drag the dollar down. “The narrative seems to be changing more towards the fact that tariffs are going to impact growth rather than inflation,” said Vinny Bleau, director of Fixed Income Capital Markets at Raymond James in Memphis, Tennessee.
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.
